Good morning, ladies and gentlemen. Welcome to the Fulton Financial Announces Fourth Quarter Year-End 2014 Results Conference Call. This call is being recorded. I would now like to turn the call over to Laura Wakeley, Senior Vice President of Corporate Communications.

Good morning everyone and thanks for joining us for Fulton Financial conference call and webcast to discuss our earnings for 2014. Your host for today’s conference call is Phil Wenger, Chairman, President and Chief Executive Officer of Fulton Financial; and 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 for today’s presentation 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 it 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 information included with Fulton’s 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.

Thanks Laura and good morning everyone. Thank you for joining us. I have a few prepared remarks before our CFO, Pat Barrett, shares the details of our 2014 and fourth quarter performance. When he concludes, we will both respond to your questions. For the first time, we’re pleased to introduce an annual outlook for the coming year as well as a slide presentation into our quarterly call. So we will refer to the slide numbers for your reference throughout our presentation. Our forward-looking statement is on Slide 2. In my comments today, I want to briefly review the year just completed and provide some additional color on our strategy. So turning to Slide 3 of our presentation for 2014, we reported diluted per share earnings of $0.84, up 1.2% over the $0.83 we reported for 2013. For the year, our return on average assets was 0.93% and our return on average tangible equity was 10.31%. Quality earning asset growth remains a top priority. After a slow weather related start to the full year - to the year, full year loan growth was modest and ended just short of our targeted 3% to 7% range. With the stronger demand for credit that we experienced in the second half of 2014 along with our current commercial loan pipeline running nearly $250 million higher than in the same time last year, we are clearly starting 2015 with better momentum than we’ve had a year ago. From a funding standpoint, overall average deposit growth outpaced our loan growth. We were particularly pleased with the year-over-year increase in our core deposits, enhancing our funding position this quarter for the loan growth. The most significant headwind of 2014 was the persistently low interest rate environment, lower loan yields resulted in year-over-year margin compression and lower net…

Thank you, Phil, and good morning to everyone on the call. Unless I note otherwise, quarterly comparisons are with the third quarter of 2014, annual comparisons are with 2013. Starting on Slide 5, as Phil referenced, for the year our net income was $158 million, a decrease of 2.4% from 2013. Earnings per share, however, increased by $0.01 from 1.2% due to share repurchases. The net income decrease resultant from lower net interest income and lower non-interest income, partially offset by a significant improvement in loan loss provisions. Net interest income was down 2.3%, mainly due to 11 basis points of net interest margin compression. Non-interest income decreased $14.3 million, or 8%, primarily due to lower mortgage banking income and overdraft fees. Our loan loss provision decreased $28 million, or 69%, as a result of improving asset quality. Non-interest expense declined by about 0.5% as investments in the build-out of our compliance, risk management and technology infrastructures were offset by the impact of cost savings initiatives implemented in early 2014. Turning to our fourth quarter results on Slide 6. Earnings per diluted share were $0.21 per share unchanged from the third quarter, our net income of $38 million, which was down $617,000, or 1.6%. The decrease in net income resulted from lower net interest income and non-interest income combined with an increase in non-interest expense. These were partially offset by the positive effect of lower income tax expense, lower loan loss provision, and an increase in securities gains. Return on average assets and tangible equity were 88 basis points and 9.96% respectively and our efficiency ratio was 67.5%. Turing to Slide 7. For the quarter, net interest income decreased $1.3 million, or 1.0%, due to an 8 basis point decrease in net interest margin, partially offset by the impact of…

[Operator Instructions] And we’ll take our first question from Bob Ramsey with FBR.

Hey, good morning guys.

Good morning, Bob.

I wanted to touch quickly on sort of just the dynamics of the accelerated share repurchase transaction. I guess as I understand it you initially settled the 6.5 million shares. But based on I guess volume weighted average price, at least to date, that suggests you probably have got -- when you do your final settlement, if current prices will prevail, another 2 million shares will come out of the share count. Is that about right?

Yes, that’s a pretty reasonable way to look at it. We don’t know what the volume weighted average price is going to be between now and termination. All we do know is it will be done by mid April. So - but you’re right. Based on where we were when we executed and where we have trended since then, we certainly would tend to get more shares rather than less.

Okay. And the full amount has already come out of capital, right and then you all have sort of already made payment on those shares, and then there would just be one final settlement or delivery of shares whenever that’s done, I guess likely in April?

Right, so the dollars that come out of capital for capital calculation, the number of shares, only 6.5 million came out because that was the upfront delivery, if that make senses?

Yes, yes, okay. All right, and so then, I guess it is -- the final settlement happens in April, there will be no new shares coming out in the first quarter, but then I guess early in the second is when you would see that that final settlement?

Assuming that the termination occurs in April, yes.

Got it, perfect. Okay, thank you.

So April just to be clear, we had a - it’s a three to five month window, so it could build and complete as early as February or at the latest mid April.

Okay.

So I’ll reserve that comment just as an unknown for us right now because the investment banks don’t really tell us their progress.

Understood. And then sort of on a go-forward basis after that point, I know you all have talked about sort of the ability to continue to deploy a fair amount of capital to shareholders. How should we think about payout ratio in the remainder of the year? Would it be your goal to return more than 100% of earnings through a combination of dividends and buybacks to shareholders again this year?

I think our goal would be to return 100% again.

Okay, but not more than a 100%, just something around the 100%?

I would say around the 100%, yes.

Okay, great. Shifting topic to margin quickly, and then I’ll hop back out of the queue, but I know you all have given guidance for NIM to be down somewhere between 0 and 4 basis points a quarter through 2015. I am just curious how much of a difference does it make if rates were to follow the future curve, rather a forward curve rather than where they are today if that takes much pressure off of the margin or not? And then as you think about quarterly progression, do you expect a little bit more in the first quarter as you have the full quarter impact of the sub-debt offering, and then maybe a little bit less in the second when I think you had some other debt maturing in early April, but just wanted to kind of see if I was remembering that correctly.

That - two different questions, and let me see if I can get these right. So from an expectation perspective, I don’t think the trend of actual rates is going to have a huge difference because when we were - I mean the last consensus that we modeled against was - is probably two to three months old at this point. So that was interest rates rising 25 basis points late in the third quarter and another 25 basis points in the fourth quarter moving on to probably a 100 basis points in 2016. So, those expectations likely have moved out a bit, but the impact on our 2015 margin and results was very much back ended and not significant. And then to the second part of your question, yes. So it is fair to think that the compression is going to be at the higher end of that range that we gave early on because of the additional carry on the extra $100 million of sub-debt, which will mature on April 1, but we do anticipate continued steady modest loan compression with originations continuing at this level and the continued roll on impact on some of our CD promotions laddering out and extending our CD book.

Okay, that is helpful color. I appreciate the comments. I’ll hop back out.

Thanks Bob.

We will take our next question from Casey Haire with Jeffries.

Hi, good morning guys.

Hi, Casey.

Hi…

I wanted to dig in a little bit on the expenses. So if I got this correctly, you expected expenses to be up low-single-digits this year despite you’ve got about $5 million of sunsetting consultant expenses and cost saving initiatives as well on the com. So what is overwhelming that and driving expenses higher on the year? What are the drivers so to speak?

But I think the single base driver is definitely salary and staff cost because our mix of staff cost has shifted over the last 18 months although our overall number of staffs hasn’t changed meaningfully. Our cost per person as we’ve ramped up so many of our risk and control activities and as we continue to look for branch optimization solution. So we’re trading risk and control professionals in for branch staff out, if you think about it in very high level terms. So there is an upward bias that we’re going to be having to address, probably on a permanent basis. And that’s reflected in the BSA/AML costs that you see. We’ve reached nearly our full complement of staff at year end, but our salary benefits are only $3 million for the year, that will be $4 million as we get into the - have the full year run rate impacted. I think midyear hiring in a lot of areas will have similar upward bias.

Okay I understood and then just kind of tying it all together in terms of the efficiency ratio, starting from 68% here - it doesn’t look like there is a lot of operating leverage on the com in the guide. Is - that sub 65% target is that still good for the year or is that at some point during the year?

I would say at some point during the year.

Okay, so likely over 65% on the year 2015?

That’s reasonable. Particularly when you think about the cost initiatives tend to have upfront costs and then realization of benefits doesn’t start until we actually have executed those. So I think that the trend would be a gradual improvement throughout the year rather than a shock immediate early on.

Okay, understood. And just last question for me, the regulatory front. Can you just give us an update in terms of how you’re working through the consent orders with regulators and if all goes well, how you expect this to play out throughout the year in terms of the orders being lifted?

So we continue to work diligently on all fronts. I would say it is a process and it’s a process from our end and it’s a process from the regulatory end. We would have - if the orders in all likelihood would not be lift until first quarter of 2016.

Okay, thanks for taking my questions.

Next question comes from Frank Schiraldi with Sandler O’Neill.

Good morning.

Good morning, Frank.

Good morning, Frank.

A couple of - first just follow-up on the margin, let’s say - and I know maybe this is - guidance has even lengthened out a bit, but let’s say you do get 50 basis points increase in the short end by the end of this year. Does that in itself start to take pressure off the margin as even we think about 2016? Or do you really need a bit more increase in the short-end before you get any real benefit?

Well, more of an increase would be beneficial certainly because we have some floors in place and but the real answer to your question, Frank, lies into what happens to deposit pricing during that time period too and that is pretty hard to estimate right now.

Right, okay. But I guess as you look at it, you’re thinking - more impactful is the short-end of the curve moving higher and not necessarily getting some steepening to the whole curve? Is that fair?

Well, steepening would be very beneficial and also the short-end going up, but we need in the short-end, we still have about $3 billion of loans that are tied to floors and we need about 50 basis points until we get pass that.

Got you. Okay and I wondered if you could just maybe talk a little about - I think you’ve mentioned it, but a little bit more about the - what’s driving your expectation for fee income up mid to high single-digit this year?

So yes, we’ve had some fee income categories that have done well, specifically investment banks and trust. We see that continuing. The two areas that really hurt us in 2014 were overdraft fees and mortgage banking and we do feel that the overdraft fees are, if they haven’t bottomed, very close to bottoming and we think we can get growth there. And we also believe we can get growth in mortgage banking area this year.

Okay, is that something on the mortgage banking funds that’s already - maybe you’ve seen pretty good results as we’ve started the year a tick up there? Or is that just something, as you look at the year in total that you feel like you can get some growth out of them?

Two things, first off, we had some - we have been some turnover in the mortgage banking area and that impacted our volumes in the second half of the year. And all those folks at this point have been replaced and I think that, especially in our Virginia mortgage operation we had some turnover last year and that’s all back to full strength. So that’s a positive for us. And as the year is starting out, it looks positive. And you know that all depends on rates, but when we look at the first two weeks of January, Frank, we compare it to what we did in the first two weeks of October, October was by far our strongest month in the fourth quarter, but our applications are running - they are 10% ahead of that pace and our rate locks from a numbers standpoint are up 18%, from a volume standpoint they are up 26%. So we are off to a pretty good start.

Okay, great. And then just finally - just looking at the - if I look at the average security and cash balances as a percentage of earning assets, how should we expect to see that trend in 2015?

Yes, I don’t think I would set a fixed target for that as much as I would say that we’re really trying to have some discipline about reinvestment risk. We really don’t want to invest in a 72% yield market. We like the range of where we are now as a percentage of total. Could we take some more high-quality, liquid assets in this environment, sure but it’s not something that we’re trying to move the needle along at this point. So I think rates and yields are probably going to determine that more than anything else.

Got you, okay great. Thank you.

[Operator Instructions] And we’ll next go to Matthew Kelley with Sterne Agee.

Yes, hi guys.

Hi, Matt.

Just a question, if you stay in a low interest rate environment and overall balance sheet growth is modest and you’re putting up decent returns on capital here. How low are you willing to take the tangible common equity ratio or the Tier 1 leverage ratio over the next year or two? Please remind me of what that bottom range of the comfort level is?

We would like our capital ratios in general to be close to our peer average, break down at tangible capital basis, I think, that’s around 8%.

Okay.

And total is I can’t recall somewhere between 30.5% and 14%.

Got it. And then…

And I think I’d just add onto that that, even with the capital changes that we have in the fourth quarter, we still have a lot of headroom over the well-capitalized levels and even more over the minimums from a regulatory perspective, to the tune of between $400 million and $500 million depending on the ratio you look at.

Got it. And then…

So loan growth will also be a factor in dragging that down. We would not use more of that with growing the balance sheet.

Got it. And then on the credit quality front overall non-performers continue to drift lower. Again over the next one, two, three years what’s the low point you’re willing to go to on reserved coverage of total loans?

Yes that is a tough question to ask as so many factors are involved there. We are currently, I think, 1.42%. Our peer average it’s about 1.15%. We believe we will continue to get closer to our peers. I don’t see us getting maybe to 1.15%, but I do see it’s getting closer to that number.

Go it. And then on the auction rate securities that were paid off at par, what was that dollar amount benefit that ran through the securities yield, just so we understand the normalized to security deal going forward?

It was about $3.25 of a million $750,000 to $800,000 of accretion that rolled through margin. There was no gain or loss.

And then, if you get the green light to combine the charters, how much will that save you?

So we’re still are working on that and we don’t have a number. So I really don’t want to share anything at this point in time. Even through there will be definitely some positive savings but there are also some offsets. But from a efficiency standpoint we will be able to operate much more efficiently right now.

Okay and then last question on your CD promotions and kind of laddering out some of the funding, how much more work do you have to do on that front and what are you running it with right now for promotional type efforts on the deposit front?

Yes I think we had a 2% five-year that wrapped up in December. But we’ll always have some sort of a pricing promotion so that our branch managers and so our CSRs have something to compete with. But I think as far as deliberately working to extend our duration, we are going to do that opportunistically. We feel really good about both of the promotions that we had in the spring and in the fall, notwithstanding higher interest expense, obviously. But we really liked the positive results; we were able to put on somewhere in the neighborhood of $600 million four-year and five-year money that we think will serve us well as a longer-term funding source. And I think what we do in future will be in large part dictated by what rates do and what expectations and competition for deposits looks like as we go into the first and second - get through the first and into the second quarter this year.

Got it, all right, thank you.

We will next go to Chris McGratty with KBW.

Good morning, everybody.

Good morning Chris.

Pat, I may have missed it. On your margin guidance, one, did that incorporate the $100 million invested in the sub debt that matures, I think, on April 1?

When you said guidance, are you talking about last quarter for this quarter or 2015 outlook?

I mean your next four quarters of zero to four down the quarter, so that assume it’s about through basis point benefit if it did roll. Is that in the guidance or is that not in the guidance?

It is, it is…

Okay, and what about the Federal Home Loan advances? I think you’ve got $150 at 4.5%, 4.60%, is that something, I think, I asked last quarter is that something that’s being contemplated or how are you thinking about that?

Yes, it’s something that we continue to think about particularly in this interest-rate environment and will let you know if and when we come to any firm conclusions on that. But at this point there’s nothing significant that you don’t already know about or see that’s included in our outlook.

Understood, last question more strategic, the Susquehanna deal is still a few months out from being closed. Anything, Phil, that you can talk to in terms tangible benefits for you guys whether it be disruption in the market from an out-of-market competitor or some lending talent that may be available in the coming 12 months? Thanks.

Yes. So there will be disruption. And we’ve been through this number of times and we are actively putting plans together to obtain customers and to obtain talent. I think it will be beneficial for us and we’ll work really hard to see that’s beneficial.

And we’ll next go to Bob Ram with FBR.

Hey thanks for taking the follow call. I know you mentioned earlier on the call that you think overdraft fees are probably near a bottom. And obviously, service charges on deposits were weaker this quarter because of overdraft fees. Just kind of curious if you could comment on what you saw in this quarter and what gives you confidence that there could be some lift from here and how you all are also thinking about, I think, the put out of paper on it, bank overdraft fees, but the potential for further regulation in this area.

So, Bob just a couple comments. When you look at linked quarter, we did in the fourth quarter but there were actually two less business days than there were in the third quarter, which did have an impact in the decrease in those fees. So I think the actual decrease was probably, substantially less than what the numbers look like. As far as what may happen going forward, that’s tough for us to see. We do think that the programs we have in place now are well in line with what’s expected from the regulators. But if they take it further it’s really hard to say.

Okay. On the net interest income front, when you sort of put together the margin guidance and the loan growth guidance, balance sheet growth guidance, it seems to me that net interest income probably is flattish year over year. Is that in the right ballpark? And I’m just curious how you think about the growth potential for net interest income all together?

Yes. I think, if you do the math, it will come out pretty flat. But there are so many things that can change that; it’s going to depend a lot on the loan activity during the year, and it’s going to depend a lot on whether we get some increases in our utilization rates which continue to be at historic low levels. And it will depend on our depositor behavior, based on moving into CDs as compared to keeping funds in checking accounts. And interest recoveries have a big impact for us and there’s just a lot of different variables.

Okay.

And I want to add - I’d add, as you get close to an inflection level, that, it doesn’t take a whole lot to create volatility quarter-on-quarter

Yes, okay. Last question is what is a good effective tax rate to use for 2015?

45.

Okay, thank you guys.

Thank you.

We’ll next go to Blair Brantley with BB&T Capital Markets.

Good morning everyone.

Good morning.

Most of my questions have been asked and answered. Just in terms of loan to deposit ratio, is there any action there trying to move that lower? Or are you pretty comfortable with where you are at right now?

Yes I think we finish the year at about 97%. We also look at a loan to customer funding ratio which would include some off-balance-sheet monies that our customers have, which is - would drive that number down. So I think we are pretty comfortable where we are at right now.

So nothing out there just to maybe push that lower over the next four to six quarters or anything like that?

Well if our deposits continue to grow faster than our loans, that will decrease, I think we would actually like to have the opposite happen.

Okay. I just didn’t know if there was anything targeted there. And then, bigger picture, what is it really going to take in this current environment for you guys to get back to above the 1% ROI? And what is maybe some near-term and longer-term targets around ROI?

So a steeper yield curve and an increase in short-term rates would be extremely beneficial to meeting those goals. We will continue to manage expenses and do our best there. Increases in fee income are going to help for this year. So given everything that we see right now, I’m not sure that we can get it accomplished this year. But it certainly is our goal is to continue to move that number up.

Okay, thank you very much.

Next go to David Bishop with Drexel Hamilton

Good morning gentlemen.

Hi David

Following up on Blair’s question and, Pat, your answer, in terms of higher short-term rate, may be, update us in terms of your sensitivity or positioning to an increase in short-term rates, maybe what the impact at least in terms of what moving forward the first 25 or 50 basis points would have and may be in terms of the loan portfolio?

Sure, haven’t changed a whole lot from last quarter. We are at about a 4% interest sensitivity for a 100-basis-point rise. And that increase is - I’m not going to say exponentially, but it’s double or even a bit more than that for the next 100-basis-point rise which reflects that we give away the first 55 basis points or 60 basis points to getting all of our loans that are at floors off of those floors. We said in the past that we are modestly asset sensitive. I don’t think that changes at this point. So just status quo. You let us know when you think interest rates are going to go up.

Got it, thank you.

Thank you

We’ll next go to Matthew Kelley with Sterne Agee.

Yes just the quick modeling detail, what was the AOCI at the end of the quarter? I have it was at negative $12 million at 9/30. What was that at 12/31?

Just one second, I think you’ll be able to get that for you. You will hear pages flipping.

I think you have it deep in the deck, I’m sure. On that line, were there any pension adjustments at year-end I guess, is what I was driving at as well?

Yes it’s about $18 million at year-end and definitely reflected additional pension adjustments.

Okay, all right. Thank you.

You bet. Thank you for asking about - thank you for asking about AOCI.

And it does conclude today’s question-and-answer session. I’ll now turn the call back to Phil Wenger for any additional or closing remarks.

Well thank you all for joining us today. We hope you’ll be able to be with us when we discuss our first quarter results in April.