Fulton Financial Corporation (NASDAQ:FULT) Q2 2023 Earnings Call Transcript

Mark McCollom: Yes. So the drivers there is, there were a couple of items in the second quarter that we would deem to be things that will not recur, which probably in the aggregate totaled about $2 million. But you’re correct. If you take the guide and look to where we are mid-year, we would expect over the next couple of quarters for expenses to come down a little bit. There’s also just some normal things with the real estate and otherwise, which should back off a little bit in the second half of the year.

Feddie Strickland: Got it. That’s helpful. And then switching gears to the margin. I know you haven’t provided 2024 guidance yet, but is it reasonable to see the margin bottoming towards the end of this year and then potentially expand into early 2024, just as loans reprice and earning assets potentially remix with the assumption that the Fed stops hiking this year after one or two more hikes?

Mark McCollom: Well, yes, I was going to start my comments with what you just said at the end. I mean I think depending – if we all had that crystal ball to know when rates will stop and when will start to actually then how long will the pause be before we start to see the expected declines. But I think if that scenario plays out the way you’re saying it, yes, I think it’s reasonable to assume that somewhere in the first half of 2024 is where you see things bottom out.

Feddie Strickland: Understood. And just one last question for me, kind of on that same discussion point as we potentially near the end of the hiking cycle. Have you considered restructuring the securities portfolio for additional interest income and potentially taking into some unrealized losses, I guess, realizing them? And can you remind us the duration of the securities portfolio today?

Mark McCollom: Yes. Yes. So we have looked at those and haven’t found one that was compelling enough to actually execute on. But I mean, I mean, we consider those kind of transactions. We’ve certainly seen other – some other institutions do it. For us, the total duration of the portfolios between – it’s around 5.5 to 6 years. We’re a little bit longer there because we have so much commercial loans that are short. So from – just an interest rate risk perspective, we’ve taken a little bit more duration in the investment portfolio to balance out our overall interest rate risk.

Feddie Strickland: Got it. Thanks for taking my questions.

Mark McCollom: You bet. Thanks.

Operator: [Operator Instructions] Our next question comes from line of Manuel Navas from D.A. Davidson. Your line is open.

Manuel Navas: Hey. Good morning. Just following up on the securities portfolio. If – how much – given that duration, how much of that AOCI and given if rates stayed, we just had one more hike and rates were that paused, how fast would that AOCI build back by the end of 2024?

Mark McCollom: A lot of that, Manuel, really depends on do you think do rates pause and the curve stays inverted or the rates – I mean, really what happens in kind of that intermediate portion of the curve is going to have the most influence over that AOCI level. But I mean, assuming it stays exactly where it is, if you just look at kind of the – what that total number is today of $320-some-odd million, that would bleed out over that duration and revert back to par.

Manuel Navas: Okay. That’s helpful. Could you remind me on some of the seasonality you see in deposit flows coming into the back half of the year?