Fulton Financial Corporation
Analyst Presentation
January 27, 2004
Fulton Financial Corporation1
Forward-looking statement
• The following presentation may contain forward-looking statements about Fulton Financial Corporation’s growth and acquisition strategies, new products and services, and future financial performance, including earnings and dividends per share, return on average assets, return on average equity, efficiency ratio and capital ratio. Forward-looking statements are encouraged by the Private Securities Litigation Reform Act of 1995.
• Such forward-looking information is based upon certain underlying assumptions, risks and uncertainties. Because of the possibility of change in the underlying assumptions, actual results could differ materially from these forward-looking statements. Risks and uncertainties that may affect future results include: pricing pressures on loans and deposits, actions of bank and non-bank competitors, changes in local and national economic conditions, changes in regulatory requirements, actions of the Federal Reserve Board, the Corporation’s success in merger and acquisition integration, and customers’ acceptance of the Corporation’s products and services.
Presentation outline
Corporate profile
Strategic initiatives
Asset quality
Future direction
Financial performance
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Fulton Financial Corporation
Regional financial holding company (formed in 1982)
11 bank subsidiaries; 3 financial services subsidiaries
Asset size: $9.8 billion
Second largest commercial bank headquartered in Third Federal Reserve District
Fulton Bank founded in 1882
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Where are we located?
Fulton Bank $ 4,083,000
Lafayette Ambassador Bank 1,221,000
The Bank 1,064,000
Lebanon Valley Farmers Bank 780,000
Premier Bank 489,000
Hagerstown Trust Company 467,000
Skylands Community Bank 412,000
Delaware National Bank 367,000
FNB Bank, N.A. 293,000
Swineford National Bank 289,000
The Peoples Bank of Elkton 105,000
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Fulton Financial Advisors, N.A.
Includes Dearden Maguire Weaver and Barrett, LLC
and Fulton Insurance Services Group
As of December 31, 2003:
$5.0 billion; $3.5 billion in assets under management
Products and Services
Personal trust Insurance
Asset management Corporate trust
Retirement services Cash management
Brokerage Private banking
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Fulton Mortgage Company
Established April 2001
Coordinates residential mortgage lending throughout FFC
Expanded, competitive product line to customers of all affiliates
In partnership with each affiliate, focused management team on residential mortgages
Entry into new markets for FFC
Record originations in 2003
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Fulton Financial Corporation
Mission statement
We will increase shareholder value and enrich the communities we serve by creating financial success together with our customers and career success together with our employees.
We will conduct all of our business with honesty and integrity.
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Corporate ethics
Longstanding written code of conduct
No “gray” areas
Expectations clearly outlined
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What have we accomplished?
8.8% compounded annual growth rate in earnings per share
22 consecutive years of record earnings
29 consecutive years of dividend increases
10.3% compounded annual growth rate in dividends per share
Proven business model
Consistently high performance
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Five-year performance
1998 2003
Net income per share $ .88 $1.28
Cash dividends per share $ .37 $.62
Return on assets 1.60% 1.57%
Return on equity 15.06% 15.45%
Efficiency ratio 55.3% 53.8%
Dividend payout 41.6% 48.7%
All information is as originally reported
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Stock highlights (as of 12/31/03)
Average daily trading volume 126,533
Number of Analysts 10
Number of Market Makers 39
Number of shares outstanding 108.26 million
Market Capitalization $2.37 billion
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Employee stock ownership
70% of our employees collectively own more than 2 million shares of Fulton Financial Corporation stock.
Stock options help us to retain long-term loyal employees
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Stock performance (2003)
WITHOUT dividend reinvestment: 15% compounded annual rate of return
WITH dividend reinvestment:
19% compounded annual rate of return
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Employee retention
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Employee opinion survey
Customer service Training and
Management team development
performance Sales orientation
Company image Work effectiveness
and mission Pay and benefits
Team orientation Employee
Technology and satisfaction
systems
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Customer satisfaction
96% of our customers are
Extremely or Very Satisfied with their Fulton Financial affiliate bank
86% of our commercial customers are Satisfied or Very Satisfied with us
Compared to national average of 55% of customers who are very satisfied with their financial institution*
* Source: 2003 American Banker/Gallup consumer survey
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Deposit composition trends
Dec. ’03 Dec ‘02
Non Interest-Bearing Demand 18% 17%
Interest-Bearing Demand 18% 16%
Money Market 13% 13%
Savings 11% 10%
Time Deposits 34% 39%
Customer Repos 6% 5%
Total Deposits 100% 100%
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Funding sources
as of 12/31/03
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Community involvement
Employees are actively involved in their own communities
The community benefits from this support
The banks receive additional business as a result of the relationships and goodwill that are developed
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Corporate strategic initiatives
Achieving consistent earnings growth
Maintaining high asset quality
Expanding the franchise through our well-developed acquisition strategy
Diversifying revenue stream by increasing the contribution of non-interest income
Managing capital
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Capital (At December 31, 2003)
Total Capital (GAAP): $947 million
Total Regulatory Capital (1): $895 million
Ratios:
Total Risk-based Capital (1) 12.9%
Tier 1 Risk-based Capital (1) 11.7%
Leverage Capital 8.7%
(1) Estimated
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?
Fulton Financial Corporation
Acquisitions
Resource Bankshares (pending) Bank of Gloucester County
Premier Bank Delaware National Bank
Drovers & Mechanics Bank Central Pennsylvania
18 Sovereign Bank Branches Savings Association
Dearden, Maguire, Weaver Hagerstown Trust Company
and Barrett, Inc. Denver National Bank
Skylands Community Bank Great Valley Savings Association
Ambassador Bank First National Bank of Danville
of the Commonwealth Second National Bank
Lebanon Valley of Nazareth
National Bank Lafayette Trust Bank
Peoples Bank of Elkton Pen Argyl National Bank
Woodstown National Bank Swineford National Bank
& Trust Company
Farmers Trust Bank
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Premier Bank
Assets of $600 million
Headquartered in Bucks County, PA
Six branches in Montgomery and Bucks counties
Historical double-digit growth in deposits, loans, fee income and net income
Strong asset quality
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Resource Bankshares Corporation
Assets of $860 million; headquartered in Virginia Beach, Virginia
The only Virginia-based bank with offices in Virginia’s three major markets
Market area accounts for over 73% of all deposits in state of Virginia
Allows for expansion of Fulton Financial Advisors, retail and commercial banking
Senior lenders average 24 years of industry experience
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What do we look for?
High growth areas
Dynamic market demographics
Strong performance
Asset quality
Talented and dedicated staff
Compatible corporate culture
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Acquisitions in new markets
What changes?
Replicate strong credit culture
Loan review
Investments
Asset/liability management
Compliance
Common operating platform
Audit
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Acquisitions in new markets
What stays the same?
Bank name
Board of Directors
Management team
Employees
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Benefits to new affiliates
Increased non-interest income due to introduction of new products and services
Additional capital
Increased lending capacity
Reduced expenses
Proven merger/conversion expertise
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Product availability
Residential Mortgages On-line banking
Investment Debit/Credit cards
Management Cash management
Brokerage Services Specialized lending
Insurance (leasing and indirect)
(whole life, term life, International Services
long-term care
Correspondent
through Advisors)
banking
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Composition of total revenues
Other Income Net Interest Income
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Growth in wealth management/ trust services revenue
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Growth in other income
Note: In 2001, we acquired Dearden, Maguire, Weaver & Barrett, LLC
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Moody’s Investor Service
Short-term rating P-1
Long-term rating:
Issuer A-2
Lead Bank Deposits A-1
Fitch Ratings
Short-term rating F-1
Long-term rating A
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Loan diversification (12/31/03)
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Summary of larger loans
23 relationships with commitments to lend of $20 million or more
Maximum individual commitment of $30 million
Average commercial loan commitment is $526,000
Loans and corresponding relationships are within Fulton’s geographical market area
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Commercial loan concentration
by industry (as of 12/31/03)
Industry %
R/E—Rental 17.2
Construction 16.1
Services 14.1
Manufacturing 10.6
Agriculture 8.8
Retail 8.1
Health Care 7.9
Wholesale 5.2
Other 4.7
Arts and Entertainment 3.3
Transportation 2.2
Financial Services 1.8
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Possible Future Expansion
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Looking ahead
Continue to build on our strengths
Continue to rely on the expertise and skill of our employees
Stick to banking basics while preparing for the future
Enhance customer relationship management efforts
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Board of Directors
Focused on maximizing shareholder value with an annual increase in earnings per share in the range of 10%
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Year ended Dec. 31, 2003
n $ 1.28 Net income per share
(4.1% increase over 2002)
n $ 0.623 Cash dividends per share
(11.4% increase over 2002)
n 1.57% Return on Assets
n 15.45% Return on Equity
n 53.80% Efficiency Ratio
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Average Balances (YTD December)
2003 2002 $ %
(dollars in millions)
Investments $2,600 $ 1,980 $ 620 31%
Loans 5,590 5,380 210 4%
Deposits 6,860 6,350 510 8%
Borrowings 950 610 340 56%
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Average Loan Growth (YTD Dec.)
2003 2002 $ %
(dollars in millions)
Commercial $ 1,720 $ 1,570 $ 150 10%
Comm'l Mort 1,950 1,700 250
Resid Mort 540 750 (210) -28%
Cons./Other 1,380 1,360 20 1%
Total Loans $ 5,590 $ 5,380 210 4%
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Peer group
Commerce Bancorp Provident Bankshares Corp.
First Commonwealth Provident Financial Group
Financial Riggs National Corp.
First Financial Bancorp. Sky Financial Group Inc.
FirstMerit Corp. Susquehanna Bancshares
Fulton Financial Corp TrustCo Bank Corp. of NY
Hudson United Bancorp. United Bankshares Inc.
Mercantile Bankshares Corp. Valley National Bancorp
North Fork Bankcorp. Wilmington Trust Co.
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SNL Financial Datasource Source:
Non-performing assets to total assets
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Net interest margin
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Interest rate “shocks” (as of 12/31/03)
1.7% 2.1% 2.2% 5.9%
% Change + + + -
5.4 million 6.7 million 6.9 million 18.5 million
$ $ $ $ $
NII Change (Annual) + + + -
Rate Change +300 bp +200 bp +100 bp -100 bp
Source: FFC Asset/Liability Modeling
Investment portfolio
Portfolio Components Ending Bal. Average Credit
( in millions) 12/31/03 Life (yrs.) Rating
Mortgage-backed securities $ 2,295.4 3.3 AAA—agency issued
Treasuries and agencies $ 82.2 0.1 AAA
Municipals $ 286.9 4.2 AAA—insured
Bank-issued Trust preferred stock $ 16.1 16.9 various/callable: 5 yrs
Other/Short-term Inv. $ 100.1 NA AAA
Bank Stocks $ 71.5 NA not rated
FHLB Stock $ 52.1 NA AAA
Unrealized Gain—Bank Stock $ 15.0
Unrealized Gain—Bonds $ 3.8
TOTAL INVESTMENTS $ 2,923.1 3.4
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Other income (YTD December)
2003 2002 $ %
(dollars in thousands)
Invt Mgt & Trust $ 33,900 $ 29,110 $ 4,790 16%
Mort. Sales & Serv. 21,480 17,150 4,330 25%
Service Charges 15,870 15,220 650 4%
Deposit-related fees 15,390 14,980 410 3%
Cash Mgt Fees 7,250 7,310 (60) -1%
Success Card Fees 5,110 4,990 120 2%
Merchant Fees 4,520 4,030 490 12%
Other 13,580 14,010 (430) -3%
Total $ 117,100 $ 106,800 $ 10,300 10%
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Bank stock gains
(percent contribution to EPS)
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Efficiency ratio
Source: SNL Financial Datasource
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Other Expenses (YTD December)
2003 2002 $ %
(dollars in thousands)
Salaries & Benefits $ 138,620 $ 129,360 $ 9,260 7%
Occupancy & Equip. 30,400 29,000 1,400 5%
Data Processing 11,530 11,970 (440) -4%
Advertising 6,040 6,520 (480) -7%
Telecommun. 5,270 5,330 (60) -1%
State Tax 4,140 5,470 (1,330) -24%
Stat. & Supplies 4,510 4,730 (220) -5%
Postage 3,890 3,830 60 2%
Operating Risk Loss 3,110 3,360 (250) -7%
Amortization 2,060 1,840 220 12%
Other Expenses 24,630 24,090 540 2%
Total $ 234,200 $ 225,500 $ 8,700 4%
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Accounting/Auditing
Accounting/Auditing
Compliance with accounting standards
Designated a financial expert
Disclosure committee
Enhanced Audit Committee role
CEO and CFO certifications
Audit Committee approvals of financial filings
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Looking ahead
Continued focus on:
Strong asset quality
Growth in non-interest income, particularly from Advisors
Expansion of franchise geographically
Increased loan activity
Core deposit growth
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Overview
Long-term, consistent performance
Talented and dedicated employees
Attractive returns for shareholders
Career success for employees
Financial success for customers
Prosperity for communities
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Fulton Financial Corporation
One Penn Square Lancaster, PA 17602
www.fult.com
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