Fulton Financial Corporation Stock

Hello, and welcome to Fulton Financial's Second Quarter 2026 Conference Call. [Operator Instructions]

I would now like to hand the conference over to Pat Lafferty. Sir, you may begin.

Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the second quarter ending June 30, 2026. Your host for today's conference call is Curt Myers, Chairman, Chief Executive Officer and President. Joining Curt is Rick Kraemer, 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 at fult.com by clicking on Investor Relations and then on News. These slides can also be found on the Events and Presentations page under Investor Relations on our website.

Today's conference call will contain forward-looking statements. These statements represent our expectations about the future and are subject to risks and uncertainties. Our actual results may differ materially from these statements. Please refer to our earnings release and related slide presentation under the heading Forward-Looking Statements for a discussion of the factors that could cause actual results to differ. 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 26 through 33 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures.

Now I would like to turn the call over to your host, Curt Myers.

Well, thanks, Pat, and good morning, everyone. For today's call, I'll share a few details on our second quarter performance and provide some observations on current business trends. Then Rick will review our financial results in more detail and discuss our outlook for the remainder of 2026. After our prepared remarks, we'll be happy to take any questions you may have.

The second quarter represented continued strong performance for Fulton. We delivered strong financial results. We maintained focus on supporting our customers, team members and communities. We are proud of the positive impact we're making within our company and throughout our markets. We encourage you to view our recently published corporate social responsibility report, which is available on our Investor Relations website. This report highlights the many ways our company makes a positive impact. Our strong performance reflects the dedication of our team members and the disciplined execution of our strategy, which continues to guide our decisions and position the company for long-term success.

We continue to focus on growing the company, delivering effectively for customers, operating with excellence so that we can continue to serve all of our stakeholders. We made meaningful progress in each of these areas during the quarter. Operating earnings improved as growth was solid, capital levels continued to grow, and overall credit performance was favorable. Our teams continue to deepen customer relationships and delivered exceptional service while identifying new opportunities for growth across our footprint.

We also achieved an important milestone during the quarter with the successful completion of the Blue Foundry acquisition on April 1 and the subsequent merger and integration of Blue Foundry Bank on July 11. This transaction advances our strategy by expanding our presence in Northern New Jersey, enhancing our community banking model and increasing our ability to serve customers in an attractive and growing market. We believe the combination creates meaningful opportunities for growth and long-term value creation. I want to thank our team for their efforts throughout this process. Completing this transaction in such a timely manner requires a tremendous amount of work and teamwork and collaboration and positions us for continued growth.

Our results this quarter reflect strong performance across a number of key areas. Profitability was a record high for the quarter. Operating net income available to common shareholders grew to $115.9 million or $0.60 per diluted share. Operating earnings on average tangible common equity improved to 15.71%. Operating return on average assets increased to 1.39% and tangible book value per share grew 13% linked quarter annualized. Loan growth was solid during the quarter, including the positive effect from Blue Foundry. Organic growth was driven primarily by our consumer business. Overall loan activity remains broad-based and across all of our markets. Our team members continue to have productive discussions with customers regarding growth, investment and capital needs. We believe Fulton is well positioned to support those opportunities and continue to generate disciplined growth moving forward.

Deposit balances increased from the prior quarter, including the benefit from the Blue Foundry transaction. Organic deposit trends were as expected on a seasonal basis. Deposit competition within our market has been consistent with recent quarters, and we continue to benefit from strong customer relationships and a diversified funding base across both our consumer, wealth management and commercial businesses. Additionally, our noninterest income business continued to generate steady fee income, further diversifying revenue sources and strengthening overall financial performance.

Compared to the prior quarter, commercial fee income increased 9%. Consumer fee income increased 8% and wealth management assets under management and administration reached a record $18.4 billion at quarter end. Our capital position further strengthened during the quarter. We repurchased $11.1 million of common stock while increasing tangible book value and improving our common equity Tier 1 ratio to approximately 12.1%. Our solid capital position provides meaningful flexibility to support customer growth, execute strategic initiatives and drive long-term shareholder value.

Finally, I'd like to touch on the credit environment. Our credit performance remains solid and overall asset quality metrics remain favorable. As we move through the second half of the year, we remain focused on executing on our strategy and building on the strong performance delivered this quarter.

With that, I'll turn the call over to Rick to review our second quarter financial results in more detail.

Thank you, Curt, and good morning, everyone. Fulton delivered another quarter of strong financial performance, highlighted by record operating earnings and continued balance sheet growth. For the second quarter, net income available to common shareholders was $99.9 million or $0.52 per diluted share. Operating earnings were $115.9 million or $0.60 per diluted share, up from $0.55 per diluted share in the first quarter. The improvement in operating performance was driven primarily by higher net interest income, expanded fee revenue and continued disciplined balance sheet management.

Net interest income increased $22.2 million or approximately 8% linked quarter to $284.3 million. The majority of this growth was attributable to the Blue Foundry acquisition, which contributed approximately $17.5 million during the quarter. Total loan interest income increased by $32.6 million, reflecting both acquisition-related growth and higher average balances. We also benefited from $5.2 million of purchase accounting accretion from the acquired Blue Foundry loans in addition to $9.9 million of accretion associated with the Republic acquisition. Our net interest margin expanded to 3.6%, up 2 basis points from the first quarter and up 13 basis points from the year prior period. The second quarter NIM was impacted by 1 basis point due to carrying overlapping sub debt expense for a portion of the period. Overall, this performance demonstrates our ability to maintain strong earning asset yields while effectively managing funding costs.

Deposit costs increased modestly during the quarter and overall funding costs remain well controlled. Ending loans totaled $25.9 billion, an increase of $1.7 billion from March 31. Approximately $1.6 billion of the increase came from the acquired Blue Foundry balances. Excluding the acquisition, organic loan growth was approximately $103 million. Within the portfolio, we continue to see strength in consumer-related lending, including residential mortgage and home equity production, while commercial loan balances declined modestly during the quarter. Deposits increased $1.5 billion during the quarter to $28.3 billion, mostly attributable to the Blue Foundry acquisition. Our deposit franchise remains a key competitive advantage and continues to support profitable balance sheet growth.

Noninterest income increased to $79.3 million, up $9.5 million from the first quarter. The largest driver was a $7.3 million increase in income from equity method investments, including approximately $6.9 million of gain related to an investment sold during the quarter. Mortgage banking revenue also improved by approximately $1 million, reflecting stronger production activity. Across our fee businesses, treasury management, card services and commercial banking revenues increased and continue to provide meaningful diversification to our revenue stream.

Total noninterest expense was $231 million compared with $200.3 million in the prior quarter. Operating noninterest expense was $210.6 million. Items excluded from operating results included $13.8 million of acquisition-related expenses, $5.9 million of intangible amortization and approximately $0.8 million of debt extinguishment costs associated with the redemption of subordinated debt. Notably, a $2.1 million pension plan charge was recorded during the quarter and is included in operating noninterest expense. As Curt mentioned, the Blue Foundry system conversion was completed successfully on July 11, and we remain focused on realizing anticipated cost savings and operational efficiencies going forward.

Credit quality remains sound and generally consistent with our expectations. Provision expense totaled $4.9 million compared with $14.4 million in the first quarter. The allowance for credit losses on loans ended the quarter at $382.6 million, representing 1.48% of total loans. The quarter included the establishment of approximately $31 million of initial allowance for credit losses on acquired Blue Foundry loans. Annualized net charge-offs were 0.34% of average loans, up from 0.25% in the previous quarter. Nonperforming assets totaled $187.1 million or 0.54% of total assets, remaining relatively stable as a percentage of assets. Overall, portfolio performance remains healthy, reserve coverage is strong and our credit outlook remains stable.

Our capital position remains a significant source of strength. Common equity Tier 1 ratio of approximately 12.1% increased from 11.9% in the prior quarter. Tangible common equity improved to 8.8%, up 26 basis points quarter-over-quarter. During the quarter, we issued $300 million of fixed to floating rate subordinated notes due 2036 and redeemed $195 million of subordinated notes due 2030, enhancing our capital structure while maintaining balance sheet flexibility. We also continued returning capital to shareholders through share repurchases, buying back 525,000 shares during the quarter at an average price of $21.19 per share, representing approximately $11.1 million of capital. Total repurchases under the 2026 authorization reached $35.6 million through June 30. We have approximately $115 million remaining under the current program.

Looking ahead to the remainder of 2026, our outlook remains positive. Given our performance during the first half of the year, we are making some minor adjustments to guidance to reflect performance through the midpoint of the year. We are narrowing our range for net interest income to $1.12 billion to $1.135 billion and adjusting our full year loan growth to low single digits. We are lowering our range for loan loss provision to $40 million to $60 million. We are raising the low end of the noninterest income range to $290 million from $285 million. And we are tightening our range for operating noninterest expense to $810 million to $830 million. There is no change to our full year tax range.

And with that, I'll turn the call back to Curt.

In summary, the second quarter results reflect strong execution across the organization. We generated record operating earnings, expanded our balance sheet due to the Blue Foundry acquisition, maintained solid asset quality, increased capital levels and successfully completed a major integration effort. As we move forward into the second half of 2026, our focus will be on capturing the strategic and financial benefits of Blue Foundry, continuing disciplined organic growth, maintaining credit quality and delivering sustainable shareholder value. Thank you for your continued interest in Fulton.

And, operator, I'll turn the call over to you for questions.

[Operator Instructions] Our first question comes from the line of Daniel Tamayo with Raymond James.

Yes. Maybe starting just on the balance sheet growth side, specifically on the loans. So I guess, reducing the guidance for the back half to the low single-digit range, as we think about -- well, I guess, first, what's the driver of that? And then second, as we think about kind of a more normalized growth rate for you guys in 2027 and just kind of overall, what would it take to be able to accelerate back into the mid-single-digit type range for you guys?

Yes, Danny, we're really modifying the annual guidance. So it's really just reflective of the performance in the first 6 months. So we had more modest growth in the first 6 months, and we expect the back half growth to kind of go back to previous expectations. So it's really the annual guide. We remain disciplined on credit terms and defending the margin on pricing. This can impact individual loan originations.

I think the key thing is we have good customer retention. We're adding people, we're adding customers. And it's really the moderation in that target is just reflective of the first quarter. We just did the successful integration in the second quarter. So you think about it, you have a -- first quarter is typically seasonally slower. We have an integration in the second quarter. We just expect second half to go back to what our expectations were. So on an annual basis, that moderates it to low single digit. That's really all that's there.

Okay. All right. Well, thank you for that clarification then. So it sounds like expectations still in kind of that mid-single-digit range going forward, which is great. And I guess my second question was a little bit framed around potentially a slower revenue growth, but maybe that's not the case given the loan growth. But just your thoughts on being able to generate positive operating leverage going forward, assuming, and I'm sure we'll get into the margin with someone else, but assuming maybe a tighter margin path from the increase in competition that we've been seeing.

Yes. So as we look forward, we think we can continue to generate positive operating leverage. We have some things in the back half of the year as we do the full integration, get the full cost saves from Blue Foundry. We get organic growth trending up from the first half of the year. We really think we're positioned well. I mean the change in guidance is really, we have 6 months of actual and trying to give you a feel for kind of what the full year looks like from here.

Great. And sorry, if I can just go back to the loan growth guide quickly, and then I'll step back. But just on the -- I don't know if I saw a number of pay downs or payoffs in the second quarter. If you have what those were and what you're assuming in the back half, that would be helpful as well.

Yes, Danny. So actual payoffs in the second quarter were running around, call it, $250 million a month. So that's amortization and pay downs. And then you have another, call it, $100 million a month of prepayments. We would expect that to remain fairly constant, potentially accelerating a little bit in third quarter just because of some larger loans knowing that are maturing, but it's been pretty steady.

Our next question comes from the line of David Bishop with Hovde Group.

I was wondering if you could speak to maybe what you're seeing in terms of the funding side of the balance sheet, deposit pricing competition. Just curious where you see the direction in terms of overall funding costs moving into the second half of the year.

Yes. Just a little bit on market overall. I mean we had a pretty good quarter on deposit growth because we -- it tends to trend down within the quarter on our municipal business. So you look on an overall basis, we were pretty pleased with funding and deposit flows in the second quarter. We're effectively competing in the marketplace and kind of our relational strategy, and the diversification of our deposit base is, kind of, serving us really well. We feel it's a real strength. And it was a good quarter. As we look forward on pricing, it's a competitive market. We ticked up a little bit, a couple of basis points. That trend probably continues. I'll give it to Rick to give you a little more details on pricing and impact.

Yes, excuse me. I would say, so, ending the quarter, deposit costs were about 2 basis points higher than the average. I would expect a kind of similar trend in terms of deposit costs from what you saw in second quarter into third quarter. There are some benefits we see, obviously, there was -- second quarter tends to be a lower municipal and often the offset to that is funding with some shorter-term higher-cost wholesale. So that will reverse in third quarter, which does help a little bit on the incremental funding. But generally speaking, a similar trend to what we saw in 2Q, I think, is a reasonable expectation going forward.

Okay. Got it. Then a follow-up, maybe, Curt, in terms of M&A focus with Blue Foundry in the rearview mirror. Just curious, maybe less size or maybe inclusive of size in regions that maybe whet your appetite more than others?

Yes. I mean our strategy remains the same. We've talked about it. I think our strategy will probably always be the same. $1 billion to $5 billion community banks. Blue Foundry is a great example of that, really gives us great opportunities to expand in certain markets. And then it sets us up for accelerated growth in those markets as we add people and product and capability in those markets. We saw that happen in Philadelphia post the Republic acquisition, and we got really good momentum in all of our business lines because of that. We see the same thing with North Jersey and Blue Foundry over time. So we really like those.

We've also talked about the $5 billion to $15 billion companies. We'd be interested there. There's less of them, but there's some really good banks in that space. We always just want to be ready and capable of looking at those things if they're available. And I think that strategy has worked really well for us and will continue to be our strategy.

Our next question comes from the line of David Konrad with KBW.

Just a quick one for me on the -- just a follow-up on the back half on the loan growth. Just curious if that includes or are there any headwinds from Blue Foundry? I know they have that structured consumer book. I don't know if you guys are growing that or maybe letting that roll off. But just curious on the Blue Foundry side, if there's any headwinds in your loan growth?

Yes. So in the quarter, the first quarter operating there, I think the deposit and loan flows have been as expected as we've modeled out. There's always some headwind on any integration just with that change. But it's really been positive to date, and we would expect it to be pretty immaterial from an overall standpoint as we look at the back half of the year.

Our next question comes from the line of Manuel Navas with Piper Sandler.

Just want to have a little bit more color on the rise in net charge-offs. They picked up to 34 basis points. Is that some from Blue Foundry? What kind of drove that?

Yes. So overall, in credit, we feel really good about the numbers. Credit metrics continue to trend in the right direction, and they're all at historically strong levels. Charge-offs is really just timing on resolutions and updated information on identified accounts. I mean the key thing for us, there's no newly identified issues driving that, and it really is just timing. And we would expect charge-offs to be in our normal operating range as we look at the whole year overall and even quarter-by-quarter as we move forward.

Okay. I appreciate that. With growth potentially accelerating in the back half being better than the first half, does that change the pace of buybacks at all? And what should be the kind of the right pace for buybacks?

Yes. I mean I would really just kind of point to the capital position that we have. Right now, we have strong capital levels. We're generating strong capital on a quarterly basis. It really gives us the opportunity, we think, to support any level of organic growth that we get and continue executing on our $115 million buyback. At our current stock price, buybacks remain a real good use of capital.

I appreciate that. You talked a little bit about the funding side of the NIM. What are you seeing on new loan yields? What are kind of some expectations on the asset side going forward in terms of back book repricing, ways that the direction of asset yields can go from here?

Yes. Manuel, it's Rick. Yes, so a positive trend there. We've got, over the next 12 months, just on the loan side, $5 billion in assets roughly that will reprice. If current origination levels hold, those would have approximately 70 basis points of improvement, right? So new loan originations in the low 6s overall, and those are kind of in that sub 5.5% level right now. So there's some positive tailwind there.

And then I would say on the other assets component, there's still another between security cash and opportunity to put some things to work. Our securities portfolio maturing over the next year has a yield of sub-4%, so call it like 3.85% level, and that's got upwards of more than 100 basis points of repricing opportunity as well. So there's a good tailwind there. Overall, when we look at it, I think that, that would imply a stable to slightly higher margin over the next couple of quarters. So feel good about that trend.

Our next question comes from the line of Matthew Breese with Stephens.

A few from me. Rick, maybe just on deposit costs and mix. Blue Foundry was obviously a little heavier on brokered money and CDs, not as strong as you on the deposit front. Could you just talk a little bit about what you expect to work off on their end versus retain? And then I noticed some more aggressive promotional deposit offerings from Fulton this quarter. I think there were a couple of four-handle promo rates. Is that kind of working towards remixing some of the Blue Foundry stuff? And maybe talk a little bit about that.

Yes. I think over -- to the initial question, yes, obviously, they were a little bit more reliant on wholesale, I would kind of target the overall, Matt. We actually were able to, on a combined basis, bring brokerage down a little bit quarter-over-quarter, continued to, since have worked and paid off pretty much a majority of their wholesale as well. And mind you, on a quarter-over-quarter basis, like our municipal deposits in the second quarter were down $240 million. So customer deposits growth was actually very strong. You are correct, yes, we have had some promos in more targeted markets, one of those being Northern New Jersey at more of an entry rate. So yes, there's an opportunity to pick up customers there. When you think about an all-in cost of acquisition, it's far more attractive to do it that way.

But ultimately, as we focus on direct originations on the commercial side in that market, which candidly Blue Foundry did not have a lot of, there's an opportunity to improve mix as well as we pick up customers. So kind of tackling it from a lot of different directions, but feel really good about the underlying customer growth that we saw during the quarter.

Got it. Okay. And then, Curt, you had mentioned the Blue Foundry, North Jersey markets allow for stronger growth through team hires and client acquisition and maybe a well-positioned balance sheet for those markets. Maybe talk about that and how it sets you up for 2027 and beyond from a loan growth perspective? Historically, Fulton has been kind of low to mid-single-digit growth all in organically. Do these new markets kind of make it firmly mid-single digits? Or might we see something better given the footprint there?

Yes. We really look at it across the board. So loans, deposits and fees. And just using that market as an example, we had 4 financial centers and a couple of bankers, business bankers or commercial bankers, no investment advisers really in that market. Now we have 20-plus financial centers, and because of that, we can hire more commercial bankers. We can hire more investment bankers because we had that base of customers of certain products that they did not have available. So we see -- when we do this, we see broad-based growth, wealth, fees, overall loans and deposits. And we have good proof points around that in Philadelphia with Republic. It's really driving wealth, transactional fees, deposits and loans. We expect the same in a little different scale in Northern New Jersey. We think we can really be a strong player in that market.

You had mentioned wealth. Investment management fees for the quarter were down a little bit, which I was surprised at considering equity markets were pretty strong. Is that just a function of timing? Did you waive some stuff for Blue Foundry folks, not that they had a big investment management presence? I'm just trying to make heads or tails of that.

Yes. And glad you pointed that out because it doesn't, kind of, hang together. It's really fees in -- it's timing. Certain fees hit in the first quarter. And then the market, the brokerage business, which is a big, big part of our business, is quarterly fees at quarter end. And if you remember back at quarter end last year, balances were down. So we saw AUM from fourth quarter to first quarter went down, and then first quarter to now second quarter increased $1.3 billion up to $18.4 billion. So it's really just timing and market dynamics in how a certain part of that business gets billed. But we feel really good about where we're at, our momentum there, and you would see consistent performance in that business.

Got it. Okay. And then, Rick, one for you, just longer term on that NIM, it sounds like stable to up near term. As we think about longer term, '27, maybe even '28, thinking about those repricing dynamics for the industry, we saw loan yields kind of peak out in '23. As that stuff kind of rolls off, do we start to see the NIM more in the stable to down? Or do you think you can maintain kind of up into the right '27 to '28?

Yes. I think, Matt, you're really challenging my crystal ball going out to '28. But I do think -- look, I think steady to up in the near term is very reasonable. A lot is going to depend, honestly, on what happens in just broader market dynamics, whether it's -- whether whatever happens with the Fed and/or deposit pricing. But I do think through '27, at least, in current environment, a stable-ish margin is very reasonable. So you could have some very minor repricing lower over the, call it, 18 months, but I would say it would be within the range we've been in over the last several quarters.

I know it's far out. I'm just thinking big picture.

Our next question comes from the line of Casey Haire with Autonomous Research.

I want to touch on expenses. So if we use the midpoint of the guide, it basically assumes the run rate kind of holds this level, maybe a little bit of pressure in the back half. But the high point and the bookends, if you will, imply some decent leverage if you're at the low end and a little bit of pressure if you're at the high end. Just wondering what are the swing factors that deliver those extremes?

Yes. Casey, it's Rick. I think you -- I mean, I think your initial thought is more spot on. Like, the go-forward third quarter, fourth quarter would imply something pretty constant. And I think that's where we're at. If you really -- if you look at that $210 million, call it, $210.6 million operating number, there's $2.1 million of the pension merger charge in there. That's a nonrecurring item. So call it $208 million. We'll have a little bit of -- just kind of on a stand-alone basis, call it, we'd have a little bit of upward pressure, but then you have the offsetting feature of Blue Foundry cost saves as we kind of roll throughout the year. We were at $10.5 million for Blue Foundry on a stand-alone basis this quarter. I would say by fourth quarter, that will get below $7 million. And so we're at roughly 24% cost saves today, and we'll be above the 50% run rate by fourth quarter. So yes, I think that's a good run rate.

The extremes would be the top end is that we are in the process of hiring more teams and bringing on more talent. And on the low end would be that we can get greater cost saves and some -- probably, more timing of some spend gets pushed out into '27. But I think the midpoint is really where we're trying to suggest.

Okay. Great. And then just last one for me on the ACL came down a little bit. It's still pretty strong relative to your risk profile and peer group. Just, I guess, some updated thoughts on can we get some more leverage? Can that ratio drive lower?

Yes. I think some of that's going to depend on growth going forward. But in current trends and even call it, predicted a little bit higher loan growth. Directionally, yes. I think -- I mean, there's a limit and a level. But with what we see right now in terms of delinquency trends and on a multi-quarter basis and what some of the economic data would suggest that there's probably a little room there.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Curt Myers for closing remarks.

Well, thank you again for joining us today. We hope you'll be able to be with us to discuss third quarter results in October. Thank you all.

That concludes today's conference call. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Fulton Financial First Quarter 2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Pat Lafferty, Investor Relations Officer. Please go ahead.

Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the first quarter ending March 31, 2026. Your host for today's conference call is Curt Myers, Chairman, Chief Executive Officer and President. Joining Curt is Rick Kraemer, 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 at fult.com by clicking on Investor Relations and then on News. The slides can also be found on the Events and 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.

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 27 through 34 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures. Now I would like to turn the call over to your host, Curt Myers.

Well, thanks, Pat, and good morning, everyone. For today's call, provide a few high-level observations and some operating highlights for the first quarter of 2026. Then Rick will review our financial results in more detail and discuss our outlook for the remainder of the year. After our prepared remarks, we'll be happy to take any questions you may have.

We are pleased with our start to the year. The first quarter reflects the strength of our foundation and the consistent execution of our strategy. We made continued progress against our strategic priorities by growing the company, delivering effectively and operating with excellence. As a result, we are effectively serving all of our stakeholders. We've maintained a clear focus on long-term value creation and the benefits of our community banking model are evident in our performance.

Our teams across the organization remain focused on serving customers and operating efficiently in a dynamic environment. From a performance standpoint, first quarter operating earnings were $0.55 per diluted share. Profitability remained strong with an operating return on average assets of 1.30% and an operating return on tangible common equity of 14.76%. These results reflect solid execution across the business, disciplined balance sheet management and effective capital deployment as we repurchase shares while growing tangible book value.

During the quarter, strong revenue generation and prudent expense management drove positive operating leverage, demonstrating the underlying earnings power of our business model. This execution resulted in an improvement in our efficiency ratio to 56.7% and supported strong pre-provision net revenue performance increasing $9.2 million linked quarter to $141 million.

Our balance sheet and liquidity position gives us the flexibility to meet customer demand and proactively invest in growth opportunities. Our continued investment in talent and capabilities remain central to our strategy. Target hiring and selective team lifts continue to enhance our growth efforts as these new team members become productive and help expand pipelines. These investments are translating into stronger activity, higher productivity and deeper client engagement.

Building our overall team is aligned with our long-term growth objectives. Loan activity during the quarter was solid, led primarily by growth in commercial mortgage, including an opportunistic purchase of an end-market commercial loan portfolio. That growth was partially offset by a decline in construction balances as well as the continued planned runoff of the indirect auto portfolio.

Most importantly, origination activity remains healthy. Pipelines continue to build and overall demand fundamentals remain constructive. Commercial loan origination increased meaningfully in 2025, and early 2026 origination is running above prior year levels. Relationship manager productivity has further improved year-over-year, resulting in increased customer engagement and enhanced sales results. Given these trends, we believe we are well positioned to continue generating disciplined smart growth.

On the funding side, deposit trends were also positive, reflecting strong engagement in each segment of our customer base, supported by effective sales execution and disciplined pricing. Our teams continue to focus on building deeper, meaningful relationships, which is driving results and further improving engagement. This momentum reflects the strength of our relationship banking approach and the continued impact of our customer experience initiatives. We remain focused on maintaining a balanced funding profile while carefully managing deposit costs in a highly competitive environment.

Noninterest income was steady during the quarter and again represented more than 20% of total revenue, highlighting the benefits of our diversified business model. Revenue growth in Wealth Management was partially offset by normal seasonal declines in other fee categories. On a year-over-year basis, fee income grew more than 9% across all businesses compared to the first quarter of 2025. This was led by a 12% increase in Wealth Management.

From an expense standpoint, we remain focused on cost discipline. Expense levels and underlying trends were consistent with our operating plans, as we continue to balance targeted investments with improved efficiency across the organization. Credit performance remained stable and was relatively in line with last quarter.

Nonperforming assets improved to 55 basis points of total assets from 58 basis points in the fourth quarter. We are mindful of the broader landscape including ongoing geopolitical developments and their potential impact on economic conditions, customer sentiment and market volatility. These dynamics reinforce the importance of disciplined, balanced and prudent credit decision-making as we move throughout the year.

We are also pleased to close the acquisition of Blue Foundry Bancorp on April 1. This marks an exciting milestone as we bring together 2 organizations. Our focus is on thoughtful integration, supporting customers aligning teams and building on the shared strength of our combined franchise. Integration planning is progressing well, and we look forward to completing these efforts later this summer.

As we look ahead, our priorities remain unchanged. We will continue to focus on profitable growth, prudent risk management and disciplined capital allocation while delivering value for our customers our team members and our shareholders. With that, I'll turn the call over to Rick to review our first quarter financial results in a little more detail.

Thanks, Curt, and good morning, everyone. Unless I note otherwise, the quarterly comparisons I discuss are with the fourth quarter of 2025.

For the first quarter, operating net income available to common shareholders was $99.7 million or $0.55 per diluted share, consistent with last quarter and reflective of solid execution across the business. On a GAAP basis, earnings were $0.51 per diluted share. The difference between GAAP and operating results was primarily driven by acquisition-related expenses for deposit intangible amortization and other nonoperating items detailed in our reconciliation tables.

Net interest income totaled $262 million, declining approximately $4 million, driven largely by day count. Within that, interest income declined due to slightly lower loan and security yields while interest expense also declined, reflecting continued progress in managing deposit pricing and improved funding mix.

The net interest margin was 3.58%, down just 1 basis point from the fourth quarter. Importantly, margin performance continues to reflect underlying structural stability rather than short-term tactical actions. Deposit pricing discipline continues to mostly offset asset yield pressure and funding mix improved as brokered balances declined further during the quarter.

Our interest rate risk profile remains relatively neutral, providing stability throughout a volatile and less predictable rate environment. Deposit average balances were stable while ending balances increased $179 million during the quarter. This was driven by softer earlier quarter seasonal trends, which rebounded as the quarter progressed.

Growth was driven by higher savings balances and an increase in noninterest-bearing demand deposits. Total cost of funds decreased 9 basis points, reflecting both pricing actions and favorable mix. Loan balances increased $121 million during the quarter with average loans also up modestly. Yield trends reflected ongoing repricing dynamics while credit spreads on originated loans remained stable. As always, we continue to emphasize disciplined pricing and return thresholds.

Moving to the investment portfolio. Securities increased by $28 million. as investments as a percentage of total assets remained at 15%, a level that continues to provide balance sheet flexibility. Liquidity remains strong, supported by a well-diversified funding base. AOCI increased by $23 million during the quarter given the late March rise in interest rates.

Noninterest income totaled $69.8 million, effectively flat with the prior quarter. Wealth management revenue increased during the quarter and was partially offset by modest declines in commercial and consumer banking fees, largely due to seasonality and 2 fewer days in the quarter.

Fee income, again represented just over 20% of total revenue, which continues to enhance earnings stability. On the expense side, total noninterest expense was $200.3 million, down in the fourth quarter. The decline was driven primarily by lower incentive compensation and continued discipline across nonpersonnel costs, partially offset by $2.6 million of acquisition-related expenses.

On an operating basis, expenses totaled $190.7 million and the efficiency ratio improved to 56.7%. We believe this level of efficiency is sustainable as we continue to invest selectively in people, systems and strategic priorities. Credit performance remained stable during the quarter. The provision for credit losses was $14.4 million, resulting in an allowance for credit losses of $367.5 million or 1.51% of total loans.

Nonperforming assets improved to 55 basis points of total assets and net charge-offs were 25 basis points of average loans annualized. Our reserve levels continue to reflect a balanced and prudent assessment of portfolio performance, forward-looking economic assumptions and borrower and sector level analysis.

Turning to capital. Our CET1 ratio increased to approximately 11.9% and the tangible common equity ratio improved to 8.6%. During the quarter, we repurchased approximately $24.5 million of common stock under our 2026 authorization. From a capital allocation standpoint, our priorities remain funding organic growth first, maintaining discipline around share repurchases and preserving flexibility for future opportunities.

We closed the acquisition of Blue Foundry Bancorp on April 1 and the transaction will be reflected in our second quarter results. From a financial standpoint, the deal is expected to be immediately earnings and tangible book accretive, in line with previous expectations. Revenue enhancements are expected to be driven primarily by relationship expansion. We remain confident in both the strategic rationale and the financial benefits of the transaction.

Looking ahead to the remainder of 2026, our expectations remain consistent. We are affirming our full year 2026 operating guidance with the only change being an update to our interest rate assumptions to reflect a 25 basis point cut in July rather than March. We continue to expect annualized mid-single-digit loan growth, controlled expense growth and strong capital generation.

Overall, our first quarter performance reflects high-quality, repeatable earnings supported by prudent risk management and disciplined execution. With that, operator, please open the line for questions.

[Operator Instructions]. Our first question will be coming from the line of Daniel Tamayo of Raymond James.

Maybe one for you, Rick, on the expenses to start things off just because it was I think, a better quarter than expected in the first quarter from a core perspective, but then the guidance was reiterated. Help us kind of think about the pace of expense add and then cost savings as we go through the year and if you're -- as we think about kind of where we may shake out towards the end of the year, from a run rate basis post everything with the deal, if there's a number or a way to frame that, that would be helpful.

Yes. Thanks, Dan. So look, I think overall, I would still -- on the annual guidance, I think, still a lot of comfort right around that kind of middle of the range. So that would imply, obviously, progression higher kind of, call it, from that 191 operating base today on a stand-alone basis to something closer to 200 by the end of the year.

And then you have to factor in that, that what we called out last time, we still feel very comfortable with that $27 million for the second, third and fourth quarter combined for Blue Foundry. So well, obviously, that will be a little bit heavier in call it, 2Q. We're not systems -- we're not planning for systems conversion until middle of July. But we think by the end of fourth quarter, we will be at our 50% cost save run rate. So hopefully, that helps.

Yes. I mean maybe I can try and put a little bit of -- well, I have to work through the model a little bit, but I think the number I'm looking at for the consensus. I apologize, I don't have it up here, but I had a number around the [ $2.15 ] range, I believe, in the fourth quarter. Is that in the ballpark?

Just trying to -- obviously, like we'll work through some stuff over the next couple of quarters, but -- and I appreciate the puts and takes that you just walked through, but is it possible to get that specific?

My gut reaction is that, that's a little high based on where we should be on a run rate basis and hitting that 50% cost saves.

All right. Do you have -- just give us some help on the classified and criticized in the quarter just directionally from where they ended in the year?

Yes. Danny, I mean classified and criticized continues to trend down, nonperformings trending down. So those credit metrics continue to either be stable or move in a positive direction.

Okay. And then, I guess, lastly, the deposits was a nice strong quarter of core deposit growth in the first quarter. Just give us your thoughts, if you can, on your ability to hold those levels, obviously not expecting maybe the same kind of growth going forward, but from a perspective of noninterest-bearing and just overall core deposit growth, how you're thinking about the trajectory from here?

Yes. I mean we don't see long-term trends changing. We did have a good first quarter. Core was up. There's seasonality, there's account flows in commercial and municipal, so those things will bounce around quarter-to-quarter, but those kind of trend lines, we see being pretty consistent as we move forward.

Danny, the only thing I would add to that is just keep in mind the composition of Blue Foundry deposits in the very near term, right? So we bring that on 2Q. They had obviously a very low concentration in noninterest bearing. So on a percentage basis, that's going to change the our pro forma a little bit. But on the balances, Curt spot on.

[Operator Instructions]. Our next question comes from the line of David Bishop of Hovde Group.

Curt, Rick, just curious, you guys definitely bucked the trend, same this quarter in Mid-Atlantic able to show loan growth here. Just curious what geographies maybe drove the growth? And -- just curious maybe what prepayments and payoffs look like this quarter relative to the last few?

Yes. Just kind of a couple of points on loan demand and growth, maybe overall might be helpful. We continue to expand the teams throughout the footprint. So we've been ramping that up as we talked about over the last couple of quarters. Pipelines meaningfully higher year-over-year and it's up even linked quarter.

So fourth quarter, first quarter pipeline up, that's a good metric. You get to the end of the year, that typically tails off and then you rebuild in this year, but were up linked quarter we think we're generating the originations that we need to get the guidance. We reaffirm the guidance. There certainly are headwinds runoff in construction for us. the perm market is very competitive.

So we're being prudent and pretty selective in what goes to permanent. So you see over the last 4 or 5 quarters, some headwind from that. And then borrower sentiment, they're a little apprehensive here in the first quarter. I think that's why that -- you see a little softer first quarter overall. We're feeling that as well, but we definitely have some good momentum. And just to be clear, I think we have the team in place, and we're winning business to the pace that we can get our guidance.

David, I might just add as a data point on construction, so the maturity schedule that we've seen -- the action maturities we've seen over the past year versus what we see over the next 4 quarters. So it was double right? So we're looking at 50% or less of that maturity wall for construction to perm over the next 4 quarters. So that helps alleviate a lot of that future pressure as well.

Got it. That's good color. And a follow-up maybe on a capital planning perspective. Just curious, remind me if there is any target levels you guys are sort of managing to in terms of maybe CET1 or [ TC ] that over and above, you would consider excess for share repurchases?

Yes. I mean, we don't manage to specific levels. We feel capital is pretty robust right now. We did -- we were pretty active in the buyback in the first quarter, so we feel well positioned to deploy capital. And again, that's organic growth, any corporate activities, whether it's a portfolio purchase or a bank or something like that. And then we'll use the buyback opportunistically. So we feel good about our capital levels and I think that gives us a lot of opportunity and flexibility as we move forward.

Our next question will be coming from the line of Casey Haire of Autonomous Research.

This is [ Jackson Singleton ] on for Casey Haire. So Rick, I just wanted to touch on NIM in 2Q given the close of Blue Foundry. Any help you can give here just on what we can kind of expect directionally?

Yes, directionally higher, right? So obviously, we reaffirmed our NII guidance, but we feel good about the purchase accounting marks that we announced initially. So you'll start to see that purchase accounting accretion come through in 2Q.

I would say, on the core margin, if you think about deposit repricing, I think that is starting to trough. So I would turn attention more towards -- I think it's actually Slide 21 of our deck on some of that fixed asset repricing and the back book A lot of the maturities, so just on that $4.4 billion of loans we have that are repricing within the next 12 months, you'll see at current market rates and spreads anywhere probably from 50 to 60 basis points benefit on that back book.

So you really start to focus more on the asset repricing going forward. But feel good about the original estimates we had out there for Blue Foundry. So that will all start kicking in soon.

Got it. Okay. And then for my follow-up, have you guys done any work on just the Basel III proposal and the impact it could have on capital ratios?

Loosely. I think benefit -- obviously, there's some benefit to us because of the relative size of our residential portfolio. So -- but I don't have any specific numbers to say, but it is modestly beneficial.

Our next question will come from the line of Matthew Breese of Stephens Inc.

I had a few questions. I hope you don't mind, but I'll keep it tight. First one was just, Curt, I think you had mentioned maybe a portfolio purchase. What was that? What was the size of it in market, out of market? And are you considering additional portfolio purchases to get the guidance?

Yes, Matt. So it was a unique opportunity, I would say, commercial portfolio right in the heart of our franchise. So it's a really good opportunity. We purchased it from a high-quality institution that does business the way we do business. Granular, about $1.2 million average loan size in there.

Overall portfolio was around $200 million. It's a pretty similar customer base to ours, again, right in the heart of our market. And I think we've referenced this a couple of times over the last couple of years that we want to be in a position opportunistically, whether it's a portfolio purchase, whether it's a bank M&A, things like that. So we're always looking for these opportunities but it was unique and we are positioned well, and we feel really good about it.

Got it. Okay. And then I don't know if this long to Rick or you, Curt. But with Blue Foundry, you get geography-wise and deeper exposure to Northern New Jersey, which are economically more vibrant areas. How does that change the loan growth outlook for you all? Does it change commercial real estate growth dynamics? Is that a '26 or '27 event? And then maybe oppositely, is there anything on their books now that you have it that we should anticipate being in run-off mode?

Yes. So we feel really good about that market. It is a good market. We were in the market just with a handful of financial centers, and we had kind of teams covering that from further away. So it really gets us in that market in a bigger way. We feel really good about it. We've got the legal day 1 quickly.

Integration is going well. Their team is energized. Our team is energized. We feel good overall about it. The market -- I mean I don't think it's going to move the overall dynamics for us. We're going to do business similarly there as we do throughout our footprint. Their book is very much a community banking book, small business and small real estate.

So we have a lot of opportunity to go upmarket in real estate, which they couldn't, but do things that we typically do throughout the footprint. We're not looking to do anything different than we do. Our mortgage business, our wealth business. The synergy we got on the [ Republic ] transaction for our wealth business is pretty meaningful. And we think we're going to have those kinds of opportunities there.

So we see upmarket commercial. We see wealth and then just a really good market overall driving all of our businesses. So we definitely see it as a net opportunity. From a runoff standpoint, like there's nothing on there that we're saying, "Hey, we don't do that business. We're going to run it off." Through transition, you get a little bit of runoff risk that will work really hard. But there's nothing that is specific and purposeful that will run off there. That's meaningful to the overall organization.

Yes. Matt, I may just add on. So a significant portion of the originations have been either brokered or third party. So we do have -- like on the residential side, we obviously have a pretty significant capability in origination. So we'll be able to replace not necessarily run off or replace that with Fulton originated paper, which is going to help spreads and absolute yields in those portfolios as well. So I know it's a little bit of a nuance, but I don't think it's a runoff. It's more of us using our capabilities to replicate what they were doing.

Got it. Okay. Last one for me. Share repurchases, you've been at it now for, I think, consistently 5 or 6 straight quarters. It feels like we've kind of ended up in a range of $20 million to $30 million per quarter in buybacks. Is that something we should model at least the next couple of quarters, if not through the end of the year? Is that a good run rate?

We're always looking at that as an alternative. I think it really depends overall on a couple of things. So it depends on organic growth. And that's what we want to deploy capital with the most. And then other opportunities that we have that we might want to kind of hold on to capital. And then certainly, just market dynamics and pricing.

Like we look at buybacks like we look at M&A or any other corporate activities. So we have hurdles and metrics that we look at to be active in the market. But there's typically opportunities within each quarter. that we've been able to do some buybacks, and we would look for those opportunities as we move forward. We have $125 million remaining. So we have plenty of room, and we definitely are looking for those opportunities.

I would now like to turn the conference back to Curt Myers for closing remarks.

Well, great. Thank you all again for joining us today. We hope you'll be able to be with us when we discuss second quarter results in July. Thank you, everyone.

This concludes today's program. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Fulton Financial Fourth Quarter 2025 Results Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Pat Lafferty, Investor Relations Manager. Please go ahead.

Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the fourth quarter ending December 31, 2025. Your host for today's conference call is Curt Myers, Chairman, Chief Executive Officer and President. Joining Curt is Rick Kraemer, 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 at fult.com by clicking on Investor Relations and then on News. The slides can also be found on the Events and 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.

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 28 through 38 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures.

Now I would like to turn the call over to your host, Curt Myers.

Thanks, Pat, and good morning, everyone. For today's call, I'll be providing a few high-level comments as well as some operating highlights for the full year 2025. Unless I note otherwise, comparisons I discuss are with the full year of 2024 performance. Then Rick will review our quarterly financial results and provide our 2026 operating guidance. After our prepared remarks, we'll be happy to take any questions you may have.

2025 was another outstanding year for our company. I want to start by thanking all of our team members for their dedication to advancing our mission to change lives for the better and for generating strong operating results. Last year, we once again successfully executed on our community banking strategy and deliver value for customers, career success for employees and meaningful operating results for shareholders. Our goal going forward remains the same, creating long-term value by growing the company, delivering effectively for customers and operating with excellence so that we can continue to serve all of our stakeholders.

Our 2025 results were strong. Operating earnings per share of $2.16 set a new record. We also maintained a solid balance sheet and demonstrated disciplined expense management. Customer deposits grew by $449 million, and we're seeing momentum from our enhanced deposit initiatives which have increased customer engagement and driven a 25% growth in consumer demand deposit account openings year-over-year. Sales productivity is strong and CD retention remains solid. This has resulted in good deposit growth and an ability to effectively manage cost of funds over time.

Our focused and expanded business banking team has generated great results. raising over $133 million in lower cost operating deposits. Throughout the year, we highlighted some strategic actions that have offset organic loan growth. These actions represented more than an $800 million headwind during 2025. Even with these actions, our organic loan growth originations delivered overall net loan growth on a year-over-year basis. Over the course of 2025, we consistently drove growth in quarterly originations, creating a strong foundation for 2026 and beyond.

To support this ongoing loan growth, we've been adding new team members. This expands our ability to serve small businesses and middle-market customers throughout the footprint. Accordingly, in 2026, we expect loan growth to return to our historical growth rates in the mid-single-digit range. We are also pleased with our noninterest income generating performance in 2025. When excluding the bargain purchase and investment securities gains and losses, noninterest income of $277 million was up almost 7%. Noninterest income continues to represent more than 20% of total revenue and underscores the strength of our diversified revenue model as we've grown both noninterest income and net interest income at a similar pace.

The drivers of noninterest income growth were broad-based. Commercial fees grew overall by 8%, led by 17% growth in cash management revenue, Fulton Financial Advisors continues to be a meaningful contributor to overall fee income. Wealth assets under management and administration surpassed $17 billion in 2025 and referrals from financial centers to our advisers increased 17% or almost $50 million year-over-year. This strong level of activity was supported by significant new opportunities from legacy Republic First financial centers. This highlights our strategy to bring new product and value to acquire customers and grow our overall revenue base.

Turning to expenses. We continue to realize benefits from strategic initiatives driving positive operating leverage for the year. Our operating expenses grew by a modest 1.9% in 2025. When normalizing for a full year of Republic First expenses in 2024, our operating expenses would have been down 2.7% year-over-year, a meaningful contributor to profitability and efficiency. Our profitability, liquidity profile and capital position all further improved during 2025.

Our operating return on assets improved by 17 basis points to 1.28% as we continue to drive greater efficiencies across the bank. We ended the year with a loan-to-deposit ratio of 91% and allowing for continued balance sheet flexibility. Our teams work diligently to grow balances while also managing deposit costs. Our net interest margin was strong increasing 9 basis points to 3.51% from the prior year.

Net interest margin ended the fourth quarter at an even stronger position of 3.59% despite several Fed rate cuts. The consistent increase in net interest margin throughout the year demonstrated our relatively neutral interest rate profile. Our strong earnings also supported higher capital ratios helping to grow tangible book value per share by 15%. Our capital ratios ended the year at the highest level seen in more than a decade. Even after we increased our dividend and opportunistically repurchased $59 million of common stock.

Credit metrics meaningfully improved throughout 2025, and Nonperforming assets as a percent of total assets declined 11 basis points, ending the year at 58 basis points. Net charge-offs for the year remained historically low at 21 basis points as a percentage of average loans. Our allowance for loan losses ended the year at 1.51% of total loans. We believe we are well positioned moving forward.

In November, we announced the acquisition of Blue Foundry Bancorp, a strategic move that strengthens our footprint and reinforces our community banking model. We're excited to have our new team members and customers join our organization as we expand our presence in several attractive markets. This expansion positions us to deliver even greater value to our customers and shareholders as we leverage shared strengths and deepen relationships in these communities. Looking forward, we're excited about the opportunities ahead. We focused on making 2026 a year of continued strength, building on our momentum, driving growth and delivering strong results for all stakeholders.

Now I'll turn the call over to Rick to discuss our quarterly financial results and provide our 2026 operating guidance.

Thank you, Curt, and good morning. Unless I note otherwise, the quarterly comparisons I discuss are with the third quarter of 2025. Loan and deposit growth numbers I referenced are annualized percentage on a linked-quarter basis.

Starting on Slide 5. Operating earnings per diluted share were $0.55 or $99.4 million of operating net income available to common shareholders. Net interest income grew 2.8% annualized from the previous quarter, while NIM expanded by 2 basis points despite 75 basis points of Fed rate cuts from September through December. Modest asset growth and positive credit trends, combined with prudent management of deposit costs and a relatively neutral interest rate profile drove much of the linked quarter performance. Total period-end loans increased $103 million during the quarter. Growth was driven across most loan categories and offset by declines in construction balances.

As discussed throughout 2025, we continue to proactively work certain credits out of the portfolio that don't align to our long-term strategy. During the quarter, we saw RA of approximately $30 million of indirect auto and resolved an additional $211 million of adversely rated loans. In total, these strategic actions aggregated to a more than $800 million headwind for growth in 2025.

Apart from the continued planned runoff of indirect auto, we expect the impact of these activities to moderate as we move into 2026. Accordingly, we expect to revert towards our long-term historical organic loan growth trends of mid-single digits. Total deposits grew $257 million or 3.9%. Growth was relatively balanced across categories as interest-bearing deposit balances grew by $137 million and noninterest bearing grew by $120 million. Our consumer business was a key driver of deposit growth. Commercial deposits and the number of commercial accounts remain stable. However, this segment did see a rebound in noninterest-bearing balances of $40 million. Municipal deposits decreased $254 million, while other wholesale funding, including broker declined $29 million. Finally, our loan-to-deposit ratio was unchanged, ending the quarter at 91%.

Moving to the investment portfolio. Securities decreased $212 million as prepayments accelerated from previous periods. Investments as a percentage of total assets were 15% and a level that continues to provide balance sheet optionality moving forward. AOCI improved by $29 million. Net interest income on a non-FTE basis was $266 million, a $1.8 million increase linked quarter as net interest margin expanded 2 basis points to 3.59%. Loan yields declined 11 basis points to 5.82%. Fixed rate asset repricing continues to provide some benefit to loan yields in the face of declining short-term rates as illustrated on Slide 22 of our earnings presentation.

Over the next 12 months, we have approximately $5.7 billion of fixed and adjustable rate earning assets subject to repricing, currently at a blended yield of 5.01%. Of note, accretion interest was down $2.2 million linked quarter to $10.5 million. For the quarter, our average cost of total deposits decreased 10 basis points to 1.86%, while our total cost of funds declined 13 basis points due to quarterly wholesale repositioning aided by customer deposit growth.

Through the current rate cutting cycle, our cumulative interest-bearing deposit beta has been 30%, while our total deposit beta has been 20%. Our deposit pricing strategy continues to balance the desire to fund future balance sheet growth, while defending margins.

Turning to Slide 7. Noninterest income for the quarter was stable at $70 million. While consolidated fees were flat, we saw strong linked quarter growth within our Wealth, Capital Markets and SBA businesses. Noninterest income as a percentage of total revenue equaled 21% for the fourth quarter.

Moving to Slide 8. Noninterest expense on an operating basis was $204 million, an increase of $12.7 million linked quarter. This increase is mostly attributable to salaries and benefits driven by higher accrual expense of $7.5 million related to variable compensation due to continued strong annual performance.

Other noteworthy items in the quarter amounted to $2.5 million and included unseasonably high snow removal costs and elevated health care claims. As in these expenses, our quarterly and annual expenses would have been within our previously expected ranges. Of note, core salaries increased less than 1% from the prior quarter.

Items excluded from operating expenses as listed on Slide 8 include charges of $5.4 million of core deposit intangible amortization, $2.8 million of Fulton first implementation and asset disposal and $802,000 of acquisition-related expense. Turning to asset quality. Provision expense of $2.9 million was lower than last quarter and below our expected range. The quarterly provision was positively impacted by a $5 million recovery from a loan acquired in the Republic First Bank acquisition.

As Curt mentioned, we saw positive trends throughout the book. Net charge-offs increased slightly to 24 basis points, while nonperforming assets to total assets improved 5 basis points to 0.58%. Our allowance for credit losses to total loans ratio decreased from 1.57% to 1.51%, while our ACL to nonperforming loan coverage increased to 198%.

Slide 10 shows a snapshot of our capital base. We maintain a healthy capital position that provides us with balance sheet flexibility. During the quarter, we repurchased 1.1 million shares at a weighted average cost of $18.34. In December, our Board approved a new repurchase authorization of $150 million, which is in effect through January of 2027. Inclusive of share repurchases, internal capital generation was robust at $77 million. Our tangible common equity to tangible asset ratio increased to 8.5% while CET1 increased to 11.8%.

On Slide 11, we are providing operating guidance for 2026. Our guidance assumes 125 basis point Fed cut in March and assumes our previously announced acquisition of Blue Foundry Bancorp closes early in 2Q '26. Our 2026 guidance is as follows: Net interest income of $1.120 billion to $1.140 billion. Our NII guide assumes an annual FTE adjustment of $16 million to $18 million. Loan loss provision expense of $55 million to $75 million, noninterest income of $285 million to $300 million. Operating expense of $800 million to $835 million, an effective tax rate of 18.5% to 19.5%. Finally, nonoperating expenses of approximately $60 million, which includes $22 million of CDI and $36 million of merger-related costs.

With that, I'll now turn the call over to the operator for any questions.

[Operator Instructions]. Our first question comes from the line of Daniel Tamayo with Raymond James.

Thank you. Yes. Maybe starting on the loan growth guide, the mid-single digits in '26. I appreciate your comments around the lenders that were hired recently and the -- some of the headwinds that were there in '25 that are no longer there in '26. Maybe you could quantify that a bit for us? Just give us a sense for what that headwind won't be? And if there's a way you can quantify the lenders? And then if there's any number you could put around what you're assuming in paydowns as well.

Yes, Dani, just a little color on that overall. As we look back on last year, you had more than $800 million of headwinds around strategic actions that we 'took derisk the portfolio, get the portfolio where we wanted it to be. So we see those things moderating. And I think that's a big -- if you look back on last year, we feel it's about 3.5% organic growth, eliminating those headwinds. So just that really gets us back close to those long-term trends. And then as we get the increased productivity, additional people in really every area of the company from our FultFirst initiative we're really building productivity. So we've added bankers in commercial banking, business banking, SBA we're moving all of those teams forward just from an overall count. And we're doing that kind of each quarter. So it's not big teams that we're adding. It's a person or 2 or a small team and we just continue to build that momentum.

If you look at underlying originations for each of the quarters this year, we built momentum. Originations were up each quarter. The pipeline is up year-over-year as well. So as we stand here today, we're confident getting back into that mid-single-digit range and then continuing that momentum to move it forward.

And any commentary on the paydown assumptions relative to where you've been?

Yes. So as we look for -- obviously, we rolled the maturities forward. We make assumptions on just business happening. So we really don't see just the normal portfolio paydowns and prepayments of really any different year-over-year. Again, what in 2025, it was really the strategic actions that we took that were the headwinds. So we really don't see underlying changes in those prepayment activity. We feel pretty good about the ability to forecast those.

Okay. Terrific. And then maybe just a clarification on the loss provision guidance as to how you're getting there. quick math for me as I work through my model. It looks like either the net charge-offs would need to come down off the fourth quarter level or the reserves would need to come down. Are you -- maybe just a little color on how you're thinking about the provision next year.

Yes. Danny, it's Rick. Yes, look, I think all else equal, obviously, thinking about mid-single-digit growth you're kind of backing into it, you would -- in a stable environment, you'd continue to see allowance kind of drift a little bit lower, assuming, like I said, assuming a stable credit environment and a stable economic environment. you're right. I think from a charge-off perspective, relatively flat with what we've seen this year is what we're expecting.

Our next question comes from the line of David Bishop with Hovde Group LLC.

I'm curious, as you talk about or think about the mid-single-digit growth rate next year, just curious, do you think the distribution of the loan mix changes materially in terms of the new hire? Or do you think that's going to come more out of the C&I book versus CRE. Just curious how you're thinking about production next year.

Yes. So overall, what served us really well over the long term is having a diversified loan book. So our strategy is to grow each of those segments. They do grow at different paces over time. We think we have opportunity in CRE C&I, business banking, all of those categories, we feel that, that could be drivers to the accelerated organic growth and we have a balance sheet mix that we can really lean in and grow any of those at normal pace or even accelerated pace. You look at our CRE concentration, it's below 200%. We're selective. But it's a good position to be in, and we really want to grow all categories. But we think specifically in those 3, we can do a little outsized growth year-over-year.

Got it. And then in terms of the OpEx guide, you mentioned some of the hiring you've done here. So excluding the Blue Foundry deal, do you think you're going to be more aggressive maybe in some of the New Jersey markets in terms of looking to add bankers up in that market relative to maybe some of the legacy Pennsylvania footprint.

Well, specifically on the guide on expenses, like we're always active in recruiting talented people to join the team. So there's really nothing specific in the guide other than normal opportunistic hires in the marketplace. That's an ongoing effort really in all year. So we have that baked into the normal run rate around continuing to be able to add to the team. There's nothing in the guide that's outsized in expenses for new hires.

[Operator Instructions]. Our next question comes from the line of Matthew Breese with Stephens Inc.

I was hoping you could help us out with deposits. We'd love your thoughts around deposit growth for this year, including some composition thoughts? And then, Rick, if you have it either at the period end or most recent cost of deposits, just to give us some sense of trajectory on the overall cost of funds.

Yes, Matt, just a little bit on deposit growth. We feel we do have some good momentum. We referenced some of the account opening and customer engagement things that we've been doing that are driving momentum. Again, it's consumer, small business are really outsized there. We referenced the treasury performance. We referenced it in a fee income basis, 17%, but that's a really good generator of low-cost operating deposits. So really, in all those categories, consume just core consumer, kind of always building that, really good momentum in business banking. And then on treasury and cash management on the corporate side, we have some outpaced momentum there as well. So those are the categories that we feel really good about the teams driving growth.

Yes, Matt, maybe just -- just on your spot question, we finished December at 1.80. So about 6 bps lower than the quarterly average.

Got it. Okay. And then, Curt, I heard you on the pipeline sounds strong. I would love any sort of percentage comparison. I know I think you said it was up year-over-year. And then I heard you talk a little bit about kind of more diversified loan growth as you integrate Blue Foundry. Curious, geography-wise, given their geography in Northern New Jersey, what are your thoughts on kind of inching into the Metro New York City market for commercial real estate? And I just love your thoughts around that.

Yes. So first, on the pipeline. So I was specifically referencing the commercial pipeline, and that's up more than 10% year-over-year. So it's a marked improvement. We've seen a little improvement in the pull-through rate too. You've heard me talk about that before, not just things in the pipeline, but customers actually spending the money and moving forward with the project or purchase we see a little positive momentum there as well. So a couple of those factors, I think, really help us be confident in that momentum as we move forward. Then on geography, we really like the Northern New Jersey market. We're in that market. This acquisition fills out gives us a good franchise there, crossing the state lines there is not within our strategy.

Great. And then last one, I guess for Rick or Curt, just a couple of nitpicky questions on fee income. Could you help me out with, first of all, your thoughts around commercial interest rate swap income. It's a bit all over the place, but the fourth quarter was stronger than I was anticipating. What's a good run rate there? Or what are you expecting there? And then the other one is just other fee income dropped quite a bit this quarter, and I'm curious what you're expecting for run rate there as well.

Well, Matt, first, on the swap income, that really tracks with originations, and it's typically the larger deals that would have a swap versus a fixed rate, so that you're right, that does bounce from quarter-to-quarter and it really ties correlates to originations and some larger originations. So it's natural as you seeing growth and origination accelerate in the fourth quarter. That's pretty in line with what we would expect from the derivatives too.

And Matt, on the other component, I would say it's a little bit in that other really driving, call it, that quarterly volatility is income from equity method investments. So over the course of the year, we had a couple of that improved in valuation. And then in the fourth quarter, we had 1 that declined about -- well, the net of it was around $1.7 million. So probably $2.5 million is a reasonable level for that on a normalized basis.

Great. I'll leave it there. Thank you.

Thank you. And I'm currently showing no further questions at this time. I'd now like to hand the call back over to Curt Myers for closing remarks.

Well, great. Thank you, everyone, for joining us today. Hopefully, you'll be able to be with us when we discuss first quarter results in April. Thank you.

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

Good day, and thank you for standing by. Welcome to the Fulton Financial Third Quarter 2025 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Matt Jozwiak, Director of Investor Relations. Please go ahead.

Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the third quarter ending September 30, 2025. Your host for today's conference call is Curt Myers, Chairman and Chief Executive Officer. Joining Curt is Rick Kramer, 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 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 statements are not guarantees of future performance or subject to risks, uncertainties and other factors, and actual results could differ materially.

Please refer to the safe harbor statement and 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.

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 30 through 37 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.

Well, thanks, Matt, and good morning, everyone. For today's call, I'll be providing a few high-level comments as well as some operating highlights for the quarter. Then Rick will review our financial results in more detail and discuss updates to our 2025 operating guidance. After our prepared remarks, we'll be happy to take any questions you may have.

We were pleased with our strong third quarter operating results. Our community banking strategy and regional scale continue to deliver customer value and strong results for our shareholders. Operating earnings of $101.3 million or $0.55 per share demonstrates the impact of positive operating leverage, strong profitability and a diversified balance sheet.

Total revenue increased linked quarter as we grew both net interest income and fee income, while we continue to show strong expense discipline. All of these positive factors combined to generate quarterly trends that drove our efficiency ratio down to 56.5% delivered an operating ROA of 1.29% and resulted in an operating ROTCE of 15.79%.

These are all strong results for the quarter. Touching on capital. We repurchased 1.65 million shares during the quarter at a weighted average cost of $18.67 per share. We routinely evaluate all of our capital deployment options and found the opportunity to repurchase shares at attractive levels. We plan to continue to use our share repurchase authorization.

Even with this quarter's repurchase activity, we grew our tangible book value per share, 18% on a linked quarter annualized basis. Our strong performance, disciplined approach to balance sheet management and our diversified business model provided us provides us financial flexibility and positions the company for continued success.

Now let me provide a few operating highlights on the quarter. Deposit growth outpaced loan growth at $194 million for the quarter. Deposit growth was primarily driven by targeted sales campaigns and seasonal net inflows of municipal deposits.

During the quarter, total demand and savings balances grew $387 million, offset by declines in brokered and time deposits. We were able to drive this growth while maintaining a disciplined and targeted pricing strategy. Turning to loans. Originations were up linked quarter as well as compared to the prior period.

Total loan balances grew $29 million for the quarter as increased originations were offset by the impact of strategic actions we have been executing on throughout the year. Year-to-date, these actions represented more than a $600 million headwind to our loan balance growth. Moving forward, we expect these actions to moderate and loan growth to return to our long-term growth trends.

Turning to the income statement. Revenue growth was driven by a strong net interest margin and a solid linked quarter increase in our noninterest income. As a result, total quarterly revenue hit an all-time high. Our noninterest income as a percentage of revenue ended the quarter at 21%, with our fee-generating businesses growing nicely, and we are positioned well for continued growth.

Lastly, let me touch on credit. While we remain cautious on credit given general economic and geopolitical uncertainty, we continue to see steady performance in our portfolio. During the quarter, we saw improvement in nonperforming loans and charge-offs. Additionally, we saw improved risk rating migration and a continued reduction in classified and criticized loans.

The provision for loan losses remained favorable to expectations and the allowance ratio was stable compared to the prior quarter. Overall, we are encouraged by the trends we're seeing but always remain focused on identifying and managing any potential areas of weakness that may arise.

Now let me turn the call over to Rick to discuss the details of our financial results and provide comments on our 2025 operating guidance in more detail.

Thank you, Curt, and good morning. Unless I note otherwise, the quarterly comparisons I discuss are with the second quarter of 2025. Loan and deposit growth numbers I referenced are annualized percentage on a linked quarter basis. Starting on Slide 5. Operating earnings per diluted share was $0.55 or $101.3 million of operating net income available to common shareholders.

Net interest income growth driven by a strong NIM and a stable balance sheet, combined with increasing fee income helped to more than offset the anticipated increase in operating expenses. We are encouraged by the improved positive operating leverage we generated when compared to the previous quarter and on a year-over-year period basis. Total end of period loans increased $29 million during the quarter.

Residential and commercial mortgage drove growth, offset by declines in C&I. We continue to proactively work certain credits out of the portfolio that don't align to our long-term strategy. During the quarter, we saw a runoff of approximately $32 million of indirect auto and sold approximately $40 million of small ticket equipment finance loans.

Additionally, we saw about $40 million in note sales and resolved an additional $139 million of C&C loans. Combined, these actions accounted for over $250 million of loan balance headwinds during the quarter. With the exception of the continued planned runoff of indirect auto, we expect the impact of these activities to moderate as we move into 2026 and expect growth to revert towards our long-term historical organic growth trends.

Deposits grew $194 million or 3%. Growth of $387 million in demand and savings products offset a $192 million decline in time deposits which included a $108 million decline in broker deposits. A primary driver of growth was a seasonal increase in municipal balances of $450 million, in line with expectations.

We anticipate outflows and municipal balances in the fourth quarter similar to historical trends. Our noninterest-bearing balances trended lower, ending the quarter at 19.5% of total deposits. The decline in balances appears to be driven by normal corporate customer activity as our number of commercial accounts remain stable.

As a result, our loan-to-deposit ratio ended the quarter at 91%. -- moving to investments. Securities purchases lagged cash flows by about $100 million, partially offset by an improvement in AOCI. Investments as a percentage of total assets were 15.8% and a level that provides balance sheet optionality moving forward.

Net interest income on a non-FTE basis was $264.2 million, a $9.3 million increase linked quarter while net interest margin increased 10 basis points to 3.57%. Loan yield increased 7 basis points to 5.93%. Fixed rate asset repricing represented a tailwind during the quarter.

We believe this will continue to provide some cushion for margin in the face of declining short-term rates, as illustrated on Slide 21 of our earnings presentation. Over the next 12 months, we have approximately $5.4 billion of fixed and adjustable rate earning assets subject to repricing, currently at a blended yield of 5.8%.

Our net interest margin further benefited from a modestly higher level of accretion interest, which was up $1.3 million linked quarter to $12.7 million. For the quarter, our average cost of total deposits decreased 2 basis points to 1.96%, while our total cost of funds declined 4 basis points due to quarterly wholesale repositioning aided by municipal inflows.

Through the current rate cutting cycle, our cumulative interest-bearing deposit beta has been 33%, while our total deposit beta has been 22%. Our deposit pricing strategy continues to balance the desire to fund future balance sheet growth while defending margins. Turning to Slide 7. Noninterest income for the quarter was $70.4 million, the linked quarter increase was driven by our wealth and consumer businesses and aided by modest gains from asset sales.

Non-interest income as a percentage of total revenue equaled 21% for the third quarter. Notably, our wealth management business, Fulton Financial Advisors reached $17 billion in assets under management and administration and continues to be a material driver of fee income growth. Moving to Slide 8. noninterest expense on an operating basis was $191.4 million, an increase of $3.8 million linked quarter.

This was mostly attributable to an increase in salaries and benefits driven by one extra day in the quarter a lower level of deferred loan origination costs and outside service spend related to planned internal projects. Items excluded from operating expenses as listed on Slide 8 include charges of $5.4 million of core deposit intangible amortization and $207,000 benefit of other items.

Turning to asset quality. Provision expense of $10.2 million was slightly higher than last quarter. However, well within the guidance we provided last call. As Curt mentioned, we saw positive trends throughout the book. Net charge-offs declined to 18 basis points, while nonperforming assets to total assets improved 4 basis points to 0.63%.

Our allowance for credit losses to total loans ratio remained at 1.57% while our ACL to nonperforming loan coverage increased to 189%. Slide 10 shows a snapshot of our capital base. We maintain a healthy capital position that provides us with balance sheet flexibility. During the quarter, we repurchased 1.65 million shares at a weighted average cost of $18.67.

As of September 30, we had remaining buyback authorization of $86 million under the current plan. Inclusive of the share repurchases, internal capital generation was robust at $84 million. This was driven by a combination of strong earnings and a $44 million benefit to AOCI from the impact of lower interest rates. Our tangible common equity to tangible asset ratio increased to 8.3%, while CET1 increased to 11.5%.

On Slide 11, we are updating our operating guidance for 2025. Considering the recent Fed action and associated dock block, we have updated our rate forecast to include the recent 25 basis point cut in September, 125 basis points in October, and an additional 25 basis point cut in December.

Given these macro assumptions and our strong year-to-date performance, we have made the following adjustments to our guidance with emphasis on the midpoint of the ranges. We are increasing net interest income to a range of $1.025 billion to $1.035 billion. We are lowering and tightening provision expense to a range of $45 million to $55 million.

We are raising the bottom end of fee income tightening to a range of $270 million to $280 million. We are lowering the top end of operating expense to a range of $750 million to $760 million. We are modestly increasing our effective tax rate to a range of 19% to 20%; and last, lowering our estimate of non-operating expenses from $10 million to $7 million. And with that, I'll now turn the call over to the operator for some questions.

[Operator Instructions] Our first question comes from the line of Daniel Tamayo with Raymond James.

Maybe first on the net interest income guidance being revised higher, it looks like it implies some margin compression, if that's correct in the fourth quarter? Presumably related to the rate cut. Just curious for your thoughts around the impact -- if that's correct, the impact of this first cut that we had last quarter relative to future cuts if there's kind of a rebound or less impact after -- with the future cuts going forward?

Yes. Thanks for the question, Dan. Yes, you're right. You're interpretation is right. I mean, that would imply a little bit of margin pressure in 4Q Look, I'll say that for every 25 basis points on an annualized basis, it's about $2 million of annualized NII headwinds.

That said, as we continue to manage the deposit side of this and try to reach for higher betas, that does offset some of that over time. But there's a lag to that, right? So for every 25 bps that happens, you really don't catch up on the cost of the interest expense side for probably about 3 months.

So there will be some kind of near term or pressure, you're right. If the Fed stops or when the Fed stops cutting, you will start to level out several months after that.

Got it. Okay. Helpful. And then maybe 1 more high level for you, Curt. Just curious of your thoughts on positive operating leverage in 2026. It sounds like the rate cuts could certainly have an impact on that. But just curious how you're thinking about if that's a possibility for the company if it's likely and if there is some kind of breakeven point in terms of cuts, how you're thinking through that?

Yes. So I mean we're focused on continuing to generate organic growth so that we can drive positive operating leverage. There's a lot of components, expense levels, revenue levels some things within our control and some things that are not.

But we're going to manage to a point that we are -- our goal is to generate positive operating leverage on a consistent basis. To Rick's point in your prior question around impact of rate cuts, I mean, we are more neutral on our balance sheet than we have been in prior periods, and we think that will help. And then we will manage the other components of that operating leverage calculation to focus on generating that.

Okay. Helpful. All right. Well, I appreciate the color guys. I'll step back.

Our next question comes from the line of Casey Haire with Autonomous.

Yes. I guess one more follow-up on sort of the NIM outlook, Rick. The cumulative interest-bearing deposit beta, I think you mentioned was -- just where do you expect that to trend as the Fed cuts?

Yes. I think that's the level we aim to maintain, if not try to get a little bit more. Obviously, as we start to revert to more normalized loan growth, that could be some pressure, but I think around that 30% level is really the target.

Okay. Very good. And on the asset side of things, fixed rate asset repricing was a nice tailwind -- can you guys -- any color on where new money yields are versus, I think, you mentioned that 508 coupon on a what's coming, what's maturing in the next year?

Yes, new originations during the quarter were right around 6.5%, just I think a couple of bps below that 648.

Okay. Great. And just lastly on capital management. So you guys have been one of the banks that has been openly kind of looking for deals. Just wondering -- it feels like it is active in that part of the market, that $1 billion to $5 billion asset bank out -- just wondering what is -- why we haven't seen a deal from you? Is it as lack of targets? Just some color there.

Yes. So our strategy remains the same. And that, as you referenced and I previously referenced, that $1 billion to $5 billion community bank that would be an infill to give us greater market penetration in our 5-state market is the focus. We feel we continue to have opportunities there, and we want to be positioned to always be able to move forward with the things that we want to move forward with, and it is an active strategy for us.

Our next question comes from the line of Christopher Marinac with Janney Montgomery Scott.

Curt, I want to extend on your answer there. I just look further at sort of your organic opportunities in Virginia, Maryland and even Philadelphia. And how much more opportunity do you see there in the next several quarters?

We definitely have opportunity for organic growth. So primarily, we drive that by winning customers each and every day. We also drive that by adding to our commercial banking team, our wealth team, and we're always focused on talent recruitment. One strategy. And then we have full first strategies around small business to enhance growth there.

And we're really -- we have a lot of levers for organic growth and I think what you've seen this year is we have decent originations. And we've had some strategic headwinds that have offset balances this year. So underlying, we're really focused on those organic originations right throughout the company, but in those areas where we have a lot more growth potential with more limited market share.

Good. And then just a follow-up on the commercial fee income line from your commercial deposits. Does that track typically with the growth of those deposits? Or do you see other opportunities even if those analyses were to be flat to grow the fee income side?

Yes. So there's a lot of components to that. So on the account level, cash management and account level fees, they track with account growth and then activity expansion within -- or contracting within those accounts like the activity volume. We also have our swap fees are in that, that are tied to originations as well.

So it's a real mix of transactional account level growth and then things that are more tied to originations. And we've had steady performance overall, I feel good about the overall fee income or commercial fee income trajectory.

Our next question comes from the line of Matthew Breese with Stephens Inc.

Rick, in your opening remarks, I thought you had mentioned a little bit of a mismatch in securities purchases versus maturities and maybe there's some optionality there going forward. Could you just talk a little bit about to what extent we might see securities purchases and maybe some framing for where you want cash and securities as a percentage of total assets.

Yes. I think we kind of positioned in the past. We probably coming into the year were a little light from a liquidity perspective on securities. So we've moved that higher. I think managing around that 16% to 17% level of assets is about right for investments where we are. We've been fairly opportunistic and kind of pick our points when we want to invest and when we have additional liquidity.

I think there's -- the expectation, obviously, we mentioned earlier is that you'll get some municipal headwinds in the fourth quarter. So deposits will -- those deposit balances will be down a little bit. So I think just managing kind of for those balances really depends on when we buy. But like I said, 16% to 17% long term is probably the right target.

And looking at securities yields 370 today, I'm guessing what you're putting on the books has either a high 4%, maybe low 5 handle on it.

That's right. Yes.

When might we see a more pronounced acceleration in securities yields? Is like -- is there a cash flow year that's better than others and work towards that 4% and 5% level? Sorry to interrupt you.

No, sorry. Yes, I think you're right on the yields. I mean more recently, it's been in the high 4s. But no, there really isn't a pronounced cash flow. It's pretty steady stream barring any acceleration in prepayments. So I think that's kind of the wildcard, which we haven't really seen a material pickup yet. But now it's pretty steady now. And we kind of -- we gave a little bit of additional color, I think it's on Slide 21 of our deck.

On some of that fixed repricing, fixed and adjustable repricing schedule. So when you go out beyond 12 months, so basically everything right of that left column, the weighted average yield on those segments combined are around 4.5%. That just gives you some idea of upside in the outer years as well, assuming elevated rates.

Okay. And then also in both your opening remarks and REIT's, you made reference to loan growth headwinds dissipating you talked about reverting to kind of longer-term levels of loan growth -- could you just talk a little bit about the pipeline, how your strength of the pipeline, where you're expecting to see growth over the next few quarters?

And is it fair to say that, that longer-term average is kind of low to mid-single digits if you had to pick a side low or mid, where would you lean over the next few quarters?

Yes. So the long-term trends have been 4% to 6%. And I think we're trying to climb back to that 4%. We've been below that given the headwinds and strategic actions we've taken. So we want to first get to the low end of that and see where we go from there. The pipelines are up a little bit year-over-year, and we've had an increasing trend, but the pull-through rate is still lower than historical norms, customers still remain cautious in spending.

So we do see improvement, but it's modest. At this point. Overall, where we want the growth, having a very diversified balance sheet has served us really well over time, and we want to grow in all categories, and we feel like we're positioned that we can grow in all categories. Even CRE, our position relative to the market is good. So we can really attract high-quality borrowers, high-quality projects there.

So really across the board, we're trying to get organic growth because we want to win customers -- and that really is the engine behind the growth over the long haul.

Great. And then just last one for me. Curt, as you climb back to that 4% loan growth threshold does that leave room in kind of the capital stack for continued repurchases? Or what are your capital priorities as you get to a 4% loan growth rate? That's all I had.

Yes. So thanks, Matt. The priorities are the same. Organic growth and corporate activities, whether it be M&A or asset purchases or uses of capital and then buybacks. And I think you saw us in this last quarter that in the absence of those first 2 things and really strong capital generation, we lean more into the buyback.

I think if those things persist like you think, over the next couple of quarters, and we'll probably be more in that buyback focus. We have $86 million, I believe, left in the authorization. And then we typically look at that each year, but we still had $86 million remaining on the buyback that we have in place.

And Matt and maybe just to add, we made reference to climbing back to 4%. I want to just reiterate the strategic actions we took this year as Curt said earlier, we're over $600 million. It's about 3.5% annualized growth if you added that back in. So I think moving from 3.5% to 4% is not that big of a lift here. So we are seeing the growth. It's just -- you're -- obviously, we're masking that with some very strategic runoff.

Our next question comes from the line of David Bishop with Hovde Group.

Guys. This is actually Kyle German asking questions on behalf of Dave. So with the recent scrutiny around loans to NDFIs, could you update us on your current exposure levels and how you think about the sector?

Yes. So we have very low levels, pretty de minimis levels of NDFI overall. And the primary in that is loans to bank holding companies, community bank holding companies in our market. We put them in that bucket if they're nonrated debt issuances. So that's the primary. So we really are not heavily engaged in that activity.

It's Tier 2 sub debt structured as notes because they're nonrated non-CUSIP institutions.

That's the primary thing in our NDF disclosures, as you would see in the call report.

That was helpful.

Our next question comes from the line of David Konrad with KBW.

Real quick follow-up for me. And I think, Rick, you already answered this 1 a little bit, but deposit costs came down 4 bps quarter-over-quarter. As you paid off the broker CDs, with the municipality seasonality in the fourth quarter, is the $245 to jumping off point? Or will you increase your broker seats? Or will it just be a reduction in cash in a smaller balance sheet?

Yes. So we did -- we ran Austin broker during the quarter, obviously. We also had some declines in FHLB as well. So I think as we look towards fourth quarter and run out, typically, -- and we saw about 450 come in municipal during third quarter. We usually see 40% to 50% of that move out. So look, we'll look towards the most cost-effective way to manage that, and it could also be customer deposits and specials on that end too. So we're going to continue to manage our loan deposit ratio appropriately, but any of those alternatives work for us.

And I'm currently showing no further questions at this time. I'd like to turn the call back over to Curtis Meyers for closing remarks.

Well, thank you again for joining us today. We hope you'll be able to be with us when we discuss fourth quarter results and year-end results in January. Thank you.

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