Laura Wakeley - SVP, Corporate Communications Phil Wenger - Chairman, President & CEO Pat Barrett - Senior EVP & CFO.

Frank Schiraldi - Sandler O'Neill Chris McGratty - Keefe Bruyette and Woods Bob Ramsey - FBR Capital Markets Casey Haire - Jeffries David Darst - Guggenheim Securities Matt Kelley - Piper Jaffray.

Good morning, ladies and gentlemen, and welcome to the Fulton Financial Announces Second Quarter Earnings Conference Call. This call is being recorded. I would now like to turn the call over to Ms. Laura Wakeley, Senior Vice President of Corporate Communications..

Thank you. Good morning, everyone, and thank you for joining us for FFC's conference call and webcast to discuss our earnings for the second quarter. Your host for today’s conference call is Phil Wenger, Chairman, President and Chief Executive Officer of Fulton Financial Corporation.

Joining Phil is Pat Barrett, Senior Executive Vice President and Chief Financial Officer. Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released at 4:30 yesterday afternoon.

These documents can be found on our website at fult.com by clicking on Investor Relations and then on News. The slides can also be found on the Presentations page under Investor Relations on our website.

On this call, representatives of Fulton may make forward-looking statements with respect to Fulton’s financial condition, results of operations and business.

These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors some of which are beyond Fulton’s control and difficult to predict and which could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Fulton undertakes no obligation, other than required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

In our earnings release, we’ve included our Safe Harbor statement on forward-looking statements, and we refer you to this section, and we incorporate it into today’s presentation.

For a more complete discussion of certain risks and uncertainties affecting Fulton, please see the sections entitled Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in our filings with the SEC.

In discussing our performance, representatives of Fulton may make reference to certain non-GAAP financial measures. Please refer to the supplemental information included with Fulton’s earnings announcement released yesterday for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures.

Now I’d like to turn the call over to your host, Phil Wenger..

Thank you, Laura. Good morning and thanks everyone for joining us to discuss our second quarter performance. After I share my prepared remarks, our Chief Financial Officer, Pat Barrett will provide details surrounding the quarter. Then, we will be happy to take your questions. We will refer to our slide presentation throughout our discussion.

Comparisons are to linked quarter unless noted otherwise. Our cautionary language regarding forward-looking statements is on Slide #2. Turning to Slide #3, second quarter highlights, we reported diluted per share earnings of $0.21. We saw $310 million linked quarter increase in combined ending loans and investments.

Core deposits increased as well as non-interest income. Other expenses were flat. We will look more closely at all these areas and others throughout the call. Our second quarter return on average assets was 0.86% and our return on average tangible equity was 9.83%.

In the credit area, we saw moderate average loan growth linked quarter led by our Pennsylvania, New Jersey and Maryland markets. We were pleased with our C&I and construction loan growth. Overall, loan growth was slightly offset by lower average home equity and residential mortgage balances.

Average loans were up 3.1% in the second quarter of 2015 as compared to the same period in 2014. Loan growth was tempered as a result of $50 million in loan payoffs or pay downs of criticized and classified loans. Our loan pipeline at the end of the second quarter exceeded levels at the end of March, 2015, and at the end of June, 2014.

We feel good about this momentum as we enter the second half of the year. However, competition for quality credits is intense exerting pressure on earning asset yields. The loan loss provision increased as in the prior quarter we had recorded a negative loan loss provision.

Overall asset quality remains very good as demonstrated by quarter end delinquencies dropping to the second lowest level we have seen in nearly four years. Average deposits increased linked quarter and in comparison to the same quarter of 2014.

We're pleased that the 7% year-over-year increase came primarily in the non-interest-bearing demand deposit category. We're also pleased to see a significant linked quarter increase in our non-interest income excluding security gains.

This increase came from a number of major revenue categories including service charges on deposits and other related revenue which includes merchant and debit card income. Mortgage banking income increased as a result of a significant improvement in spreads on loan sales due to improved secondary market pricing.

Mortgage originations for the first six months of the year were up 18%. Mortgage applications, while down slightly linked quarter, were up year-over-year. Refinancing activity accounted for 42% of our second quarter activity compared to 60% in the first quarter.

At the end of the quarter, our mortgage pipeline stood at $212 million, which is down 11% linked quarter but up 10% year-over-year. Recruiting efforts for high-producing mortgage originators are ongoing. Of course, mortgage volume and mortgage sales gains for the remainder of the year will be largely determined by the future interest rate environment.

We were pleased that total non-interest expenses were flat linked quarter despite modestly higher outside consulting services cost associated with our continued BSA/AML build out. We still expect to see our total spend on BSA/AML related work to decrease in 2015 largely in line with our previous guidance.

We completed the consolidation of two additional branches in July bringing our total branch consolidations to 25 over the past two years. We will continue to look for opportunities for additional efficiency within our branch network.

Future decisions are contingent on keeping the appropriate balance between our customers' desire for convenience and changing delivery channel behaviors. Branch consolidations resulted in $1.1 million of implementation cost in the first quarter 2015 and $520,000 in the second quarter.

We expect additional cost of approximately $200,000 in the third quarter. As we indicated on previous calls, the 11 branch consolidations completed this year are expected to generate approximately $3 million of annualized cost savings.

Savings from changes to benefit programs and elimination of positions is expected to generate an additional $3.5 million in savings annually. The anticipated total annualized savings from our combined cost reductions initiatives is $6.5 million with approximately $4.7 million to be realized in calendar 2015.

Opportunities to further reduce our expenses are being continuously evaluated. This quarter we saw a 7 basis point reduction in our net interest margin in comparison to the 0 to 4 basis point quarterly compression on average that we provided in our outlook. Pat will discuss that bearing in his comments.

In June, we initiated a transaction which will have a long-term benefit to our net interest income. We issued $150 million of subordinated debt at an effective rate of 4.7%, and the proceeds were used in July, 2015 to redeem $150 million of trust preferred securities at an effective rate of 6.52%.

The annual decrease in interest expense as a result of these transactions is approximately $2.7 million. However, due to timing, the second quarter of 2015 included $375,000 of incremental interest expense as a result of the subordinated debt issuance. We will begin to see the benefit of this transaction on our interest expense in the third quarter.

Turning now to capital, capital levels remain above all regulatory minimums under Basel III standards. As you know, we increased our quarterly cash dividend from $0.08 to $0.09 in the first quarter using a current yield of approximately 2.75%.

Early in the second quarter, our board approved the repurchase of up to $50 million of our stock through December 31 of this year. As of today, we have repurchased 1.5 million shares for approximately $19 million on an average price per share of $12.36 under that program.

Since the beginning of last year we have repurchased over 17.8 million of our shares at an average price of a share of $12.01 under a series of board-authorized share repurchase programs. These actions are consistent with our continuing goal of generating and deploying capital for the enhancement of long-term shareholder value.

Before reviewing our 2015 outlook, I want to take this opportunity to personally thank our entire team for their ongoing work for developing the infrastructure necessary to satisfy the requirements of our existing BSA/AML enforcement action. It remains our goal to put these enforcement actions behind us in early 2016.

Based on our expectations for the second half of the year, we are updating our outlook for the year as follows. In light of recent trending, we expect loan growth to be at the low end of the range in our outlook. Our outlook for deposit growth remains unchanged.

With respect to our net interest margin we anticipate that we will experience margin compression of 5 basis points to 8 basis points over the remainder of 2015. Non-interest income growth for 2015 is expected to be at the lower end of the range in our outlook.

And finally, our outlook for non-interest expense growth for the year remains unchanged at the low single-digit rate excluding $5.6 million cost of debt extinguishment in the third quarter of 2015. At this time, I'd like to turn the call over to Pat for a more detailed discussion of our second quarter performance.

When he concludes we will both be happy to take your questions.

Pat?.

Thanks, Phil, and good morning to everyone on the call. Unless I note otherwise, quarterly comparisons are with the first quarter of 2015. Starting on Slide 4, as Phil noted, earnings per diluted share this quarter were $0.21 on net income of $37 million, which decreased $3.4 million or 8.4% from the prior quarter.

Earnings per diluted share decreased by $0.01 or 4.5% from the first quarter and were unchanged from the second quarter of 2014. The decrease in earnings reflected a decrease in net interest income, $5.9 million increase in loan loss provision, and a decrease in securities gain partially offset by an increase in non-interest income.

Moving to Slide 5, and as previously noted, our net interest income declined $661,000 or 0.5% driven by the 7 basis point decrease in net interest margin. The yield on average earning assets declined 9 basis points while the cost of average interest-bearing liabilities decreased 3 basis points.

Average interest-earning assets increased $97 million or 0.6% due to growth in average loans. The 9 basis point decrease in earning asset yields was driven by lower loan yields and lower interest income on investments.

In addition, the first quarter of 2015 included a $1.2 million special dividend on FHLB stock that increased average yield's net interest margin by approximately 3 basis points. Average interest-bearing liabilities remain flat in the second quarter while our average cost of interest-bearing liabilities decreased 3 basis points.

The average cost of deposits remains unchanged at 41 basis points while the average cost of long-term debt decreased 5 basis points reflecting the impact of the maturity of $100 million of subordinated debt in April. As previously discussed, in June, we issued $150 million of subordinated debt on the redemption of trust preferred securities.

Second quarter impact of this issuance was an increase in net interest expense of approximately $375,000 or 1 basis point of margin. The ongoing impact of this refinancing will be a decrease in annual interest expense of approximately $2.7 million or $680,000 per quarter of which approximately $500,000 will be reflected in the third quarter.

A related note is that we will recognize, as Phil mentioned, a one-time charge in the third quarter of $5.6 million as a result of the debt extinguishment. This charge will be reflected in non-interest expense.

As a reminder, our outlook for 2015 was for net interest margin compression of 0 to 4 basis points per quarter on average based on the interest rate environment at the beginning of the year. The second quarter compression exceeded this range driven by lower than expected loan and investment yields.

Furthermore, the 3 basis point decline in margin due to the absence of the FHLB special dividend was only partially offset by reduced interest expense on long-term debt.

While the lengthening of the outlook for interest rate hikes combined with third quarter impact of seasonal excess liquidity inflows we expect additional margin compression over the second half of the year to be in the range of 5 to 8 basis points, as Phil mentioned.

Turning to credit on Slide 6, based on our valuation of all relevant credit quality factors particularly an increase in net charge-offs on impaired commercial loans, we recorded a $2.2 million provision for credit losses in the second quarter as compared to a $3.7 million negative provision in the first quarter.

Net charge-offs increased $9.8 million for the first quarter resulting in an annualized net charge-off rate of 38 basis points compared to 8 basis points for the first quarter. The increase in net charge-offs was primarily due to two impaired loans which, as we previously discussed, migrated to non-accrual status during the first quarter.

Non-performing loans remained flat in the second quarter. Total delinquencies decreased $19 million or 8%. This decrease was reflected primarily in reduced emerging delinquencies or loans less than 90 days past due.

Non-performing loans accounted for 1.13% of total loans at June 30, while the allowance for credit losses to non-performing loans outstanding decreased from 120% to 113%.

With respect to over the last five years, net charge-offs, non-performing loans and delinquencies have declined significantly reaching levels that are not expected to materially change in the near-term absent significant changes in economic conditions. However, some volatility from quarter-to-quarter remains likely.

Moving to Slide 7, non-interest income excluding securities gains increased $3.5 million or 9% reflecting increases across most fee categories including overdraft fees, debit card income, merchant fee income and mortgage banking income. Note that the increase in mortgage banking income resulted from higher spreads on sale gains.

In comparison to the second quarter of 2014, non-interest income excluding securities gain increased $314,000 or 0.7% with modest increases in merchant fees, debit card income and service charges being partially offset by $400,000 decrease in mortgage banking income.

Mortgage sale gains increased $1.5 million but net servicing income declined $1.9 million. This was largely driven -- this decline was largely driven by the absence of a second quarter 2014 adjustment to the amortization of mortgage servicing rights.

During the second quarter of 2015, securities gains of $2.4 million reflected sales of equity securities as we took advantage of favorable market conditions. Our original outlook for 2015 for the growth rate in non-interest income was in the mid-to-high single-digit range.

Based on our actual results for the first six months of the year, and subject to continued strength in mortgage banking income, will likely trend towards the lower end of that range for the full year. Moving to Slide 8, total non-interest expenses were essentially unchanged from the first quarter.

Occupancy cost decreased $1.9 million due to seasonal fluctuations in snow removal and utilities costs. And OREO and repossession expenses decreased $1.2 million. These decreases were largely offset by a $2.4 million increase in outside services expense.

As Phil noted and as you’ll see when we get to Slide 9, our outlook for overall BSA/AML related costs remains largely unchanged, although the year-on-year drop in BSA/AML related outside services is likely to be approximately $4 million compared to the $5 million decline we originally anticipated.

Our outlook for 2015 for the growth rate of non-interest expenses was in the low single-digit range. As I have previously mentioned, we will recognize a one-time $5.6 million debt extinguishment charge under redemption of trust preferred securities in the third quarter of 2015.

Excluding the impacts of these debt extinguishment cost our outlook for non-interest expense growth remains unchanged. Income tax expense decreased $1.3 million or 10% while our effective tax rate remains near 25%. We expect our effective tax rate to continue at this level for the remainder of 2015.

And turning to Slide 9, as previously mentioned, we continue to make progress towards building on our a regulatory compliance infrastructure. Total BSA/AML related staffing and outside services cost continued to be largely in line with our expectations for 2015.

Slide 10 presents our profitability and capital levels over the past five quarters and as you will see we continue to demonstrate stable capital and profitability measures even with the revenue and expense headwinds that we face.

And in conclusion on Slide 11 we went through the summary of our original and updated guidance for the year for easy reference. Thank you for your attention and your continued interest in Fulton Financial Corporation. And now we will be glad to answer your questions..

[Operator Instructions] We’ll go to Frank Schiraldi with Sandler O'Neill..

Just a couple of questions. First, I think in the past you guys have talked about the difficulty of holding of floors on the C&I side.

I’m wondering is that the case if that’s still playing out and does that perhaps better position you – better position Fulton for even a small move in the lower end of the yield curve?.

Frank, I believe that our total loans at the floors at the end of the first quarter was between $3.3 billion and $3.4 billion, somewhere in that range, and at the end of the second quarter that number was down to roughly $3 billion. So it is dropping each quarter but at a fairly slow pace..

Okay. That’s helpful thanks.

And then, sorry, if I missed it Pat, but in terms of the NIM guidance for the remainder of the year, what does that bake in for -- what does that bake in in terms of interest rate hikes?.

Well, as far as the impact on margin essentially nothing, so we wouldn’t expect interest rates, short term interest rate and we’re modeling now to move up until right at the end of the year or possibly early 2016, it would be great if it moved up earlier and talked about loan floors, we still have 50 plus basis points of differential on the $3 billion of loans that are floors.

So even a 25 basis point hike will begin to have an impact on those and certainly will start to have an impact on the origination yields as well..

Okay, great.

And then just thinking about strategy going forward, you talked about getting BSA compliance behind you, in terms of 2016 does M&A once BSA/AML is sort of upgraded and does that sort of - does M&A move a lot higher in terms of your list of priorities or do you think you still – is there still stuff you’re focused on internally that maybe pushes that still to the back burner?.

I believe, Frank, that it will push that higher as we go through 2016 and get released from the orders, yes..

We’ll go to Chris McGratty with Keefe Bruyette and Woods..

Pat, on the margins got a question given the low floor commentary.

Maybe if you could kind of elaborate on how you’re thinking about the transition from margin degradation to stabilization given the floors, is that something if we get a hike in the back half of the year, closer to year end, that we see the first half of next year kind of stable or is it kind of an immediate benefit by your estimation?.

I hate to put predictions out there on margin percentage because there is so many disparate unrelated things that could happen to the numerator and the denominator.

I think from a dollar perspective we really hope to see before margin rate inflection occurs that our dollars will start to grow again of net interest income instead of continuing to be compressed in each quarter, and we’re hoping that we’ve reached that level as we were exiting the second quarter.

We actually saw our dollar compression stabilize towards the end of the quarter. From a rate compression perspective, I think that even with a rate hike there would be bit of a lag and we wouldn’t see an immediate same quarter positive impact..

Okay. That’s helpful. Thank you.

And just on the guidance on the seasonal expenses it just seems like non-recurring - is the updated expense guidance potentially come out to like 1.17, 1.18 run rate to back half of the year, I just want to make sure that I got all the adjustments and then the fees be kind of 44, 45?.

Yes. So on expenses, if you just annualize the first half of the year and the second half of the year excluding the debt extinguishment costs we’d see expenses going up by 3%, which would be the high end of the low single-digit guidance range and we’ve got an extra day in the second half we have to fight against.

We have persistently high levels of platform investment, outside services cost and certainly higher salary benefits cost that are not -- that they're sort of in our run rate.

We're going to do everything we can to work on each of those line items, but I think you should take note that we said excluding the $5.6 million we’re sticking with our low single-digit guidance range and you should infer that including that we might be a little outside that range..

Okay. Thank you. The last question is actually the [indiscernible] deal is closing about a week.

Can you talk about any opportunities that have kind of presented themselves to-date or how you think about opportunity?.

So I think, we’ve indicated all along that we felt we’d be able to pick up some customers and some employees and I think we still feel that way..

Okay, thanks..

We’ll go next to Bob Ramsey with FBR Capital Markets..

Hi, I just wondered if you could help me revisit sort of the $6.5 million of run rate expense savings from the first half initiatives, how much of that was already in the second quarter expenses?.

Bob, about -- let me see, say about $0.5 million of one-time expense and $900,000 of ongoing benefit and that will reach a steady state for the most part on benefit in Q3 for about $1.6 million. We would expect an extra an additional $700,000 of run rate savings in Q3 versus Q2.

We will, as Phil mentioned, have a couple of $100,000, $200,000 of one-time expense because a couple of our branches we aren’t actually closing till - now this month..

Okay..

You’ll see a clean - Q4 will be clean of all one-times and should be a steady stay at $1.63 million run rate of benefit..

Okay, got it. That’s helpful..

Just to be clear that’s the savings from the branch. As far as the employee benefits, I believe most of that has already been baked in..

Absolutely..

Yes..

Okay. And then I was hoping if you could talk a little bit about fee income. Obviously, you do you have some strength in several buckets, overdraft fees, debit, merchant swap income.

Just curious if how you’re thinking about those quarter kind of what drove the strength? Next quarter, do you continue to build on these levels or was there anything I don’t know how much exactly these commercial swaps, was there anything lumpy that maybe you pull back next quarter, how you’re thinking about the fees?.

So part of its seasonal and we expect that seasonality to continue this quarter in a positive light. So much of the fee income growth rate is going to be dependent on mortgage volumes and it’s really early to tell the quarter how that’s going to play out..

Okay.

But as far as swap fees and overdraft I mean all that basically nothing other than seasonality, it’s pretty straightforward?.

I think so, yes. We think so..

And I would just add to that that I think that we’ve been experiencing the compression on service charges particularly overdraft fees for such a long time that it gets hard. We’re very reluctant to call a trend after one quarter nice pick up and it’s even hard to call it seasonal given that we’ve been compressing so many quarters..

Okay. Fair enough. And I think someone asked you if sort of thinking about the run rate in the back half of the year of $44 million to $45 million is in the right ballpark.

I guess I know you all have given sort of full year guidance but not exactly clear on sort of what's in the starting point with or without security gains et cetera, and so I was kind of curious if that ball park seems right to you?.

We had $165 million last year in run rate, we’re guiding towards a mid to high single digit and I think 5% to 8% increase in our original annual outlook and we’re dialing that back to low to mid single-digit I think 3% to 5%, and that’s for full year where you can back out the $85 million that we’ve already printed this year and come up with an estimate on the remaining two quarters but it’s actually a little bit lower than the second quarter actual $44 million.

And that's how I get through the math and we will update you in the third quarter..

That is helpful and sort of getting me to what the guidance actually means, okay. And then I guess last question and I’ll hop out but you did bring the allowances of loans ratio down a bit this quarter.

I think in the past you’ve talked about continuing to sort of had that ratio trickle lower by I remember you said maybe three or five bps quarter and definitely seem to be some pickup there just kind of curious there how you’re thinking about allowance of loans today and sort of what pace maybe if quite it remains on the trajectory a day you can continue to bring that allowance down?.

So we’re still higher than our peers but we’re getting closer and I think there is room for some reduction but it’s the amount of reduction is going to slow..

Okay.

When you say it is slowed you mean from kind of the three to five basis points you guys were doing or from the sort of bigger step down I think you almost had in this quarter?.

Well definitely from the bigger step down we had this quarter..

We’ll go to Casey Haire with Jefferies..

Just want to follow-up on the expenses.

It sounds like you guys got a little more than half of your cost saves in this quarter, I’m just curious why we’re – we’re not really seeing it, you see if we look at expenses year-over-year that salary and occupancy line is actually up year-over-year and the revenue comp comparatively is down, so I’m just why are we not -- why we’re not seeing it show up as meaningful leverage?.

Well I think our guidance from the beginning of the year would have indicated that the savings that we’re going to have, we are investing in other places in the company or I think that’s simple way to say what’s happening.

I think our bias is as much more expensive platform, we’re trying to find ways to rationalize our expense to help mitigate that versus we’re creating cost saves, bringing expenses down and then deciding whether to invest.

Does makes sense? So lot of people we hired over the last two years are continuing to hire different jobs and roles and higher levels and higher cost levels than the jobs that we’re eliminating as we rationalize unprofitable branches. But it’s not an easy dollar for dollar trade..

Understood, understood.

Then just switching margins obviously the securities yields took a big hit this quarter, we all knew about the FHLB special dividend, I was wondering was there a premium amortization sort of headwind this quarter that you didn’t see coming I’m just and what is if so why would that not be a tailwind going forward given where we are with rates and just what is the biggest headwind to the margin going forward; is it loans, securities some color there please?.

Sure. So the biggest I’ll make one comment and then Pat can finish. The biggest headwind is loan yields and I would say in that regard a larger percentage of our production right now is going on floating rates than has in the past and various yields..

Just expand on that, I think we’ve been tracking to about 50 basis point gap between new originations and loan roll offs for the last several quarters; this quarter it was closer to 70 basis points, but that doesn’t show up in NIM.

It takes a long time for one quarter's net origination to roll through the average loan yields to make the difference but over time it does definitely create challenges. And I would say that just to, Casey, go back to your sort of initial entry point on the investment securities yields it was not driven by amortization.

There were seven or eight different drivers that affected that and the largest one did not even round to 1 basis point but it was actually repricing and contracting yields on municipals and our auction rate securities that were probably the two bigger drives but that was just the range of other small cash flow related things.

Well we did towards the latter half of the quarter, actually throughout the quarter we were sort of reinvesting some of our excess liquidity and building backups in our excess -- turning our excess cash into securities both MBS and CMOs we were investing I think $300 million of ending balance increase that we will see filter into the yields going forward because we are definitely investing at lower yields than the average probably I think closer to 2% versus our yield of 2.5%..

Okay, great. And just last one from me on the capital front you guys got a pretty decent size chunk of the other buyback done this quarter and yet TCE ratio has held pretty stable, and based on sort of the asset growth forecast that you guys are talking about we not kind of see much degradation in that TCE ratio.

I was wondering would that prompt you to adopt a more aggressive capital management policy?.

Well we’re going to get through the repurchase program that we have now and then our board will talk about how we want to move forward and lot of that will depend on how the BSA is progressing and when we can start getting in the acquisition again and again. So I think there is just a whole lot of factors that are kind of up in the air right now..

[Operator Instructions]. We’ll go to David Darst with Guggenheim Securities..

As you discussed the investments you’re making to build a more expensive platform I guess the word used, is there a long list of more investments you need to make over the next two to three years or where you get to a point where some of these projects are done, you will be able to roll into the next project and then limit expense growth and maybe get back to some lower efficiency ratio?.

Hi David, we think we’re well on our way to really completing most of the initiatives we have going. .

And so maybe three quarters left or you think you will get operating leverage sooner than that?.

Well our first goal is to get operating leverage because our revenues are growing and I think we’re getting closer to that with if we can continue to grow loans and have that decrease in margin happen at a lower rate we can start growing revenues. And if we do that and hold expenses constant we will have positive operating leverage..

Okay. And then --.

Go ahead..

I’m sorry, you can finish. .

I’ve got to say but we also think that we will have built a framework for and that would support an institution larger than what we are so….

And then with the $50 million, I think pay offs you said that were criticized and classified was that strategic on your part or did those materialize?.

Well, I think that most of those folks were able to find better deals someplace else and strategically we made the decision to let them go..

Okay and then….

It wasn’t a result of sales or anything of that sort..

Right, okay and then just you’re thinking about your current pipelines, how do you see the construction portfolio trending over the next year that is still something that should be a pretty good contributor to growth?.

It should be yes..

Okay, great. Thank you..

And we’ll go to Matthew Breese with Piper Jaffray..

Hi guys. This is actually Matt Kelley.

Just a question what had you noticed on deposit pricing in your markets throughout the quarter, compared to what we’re seeing over the winter fall of last year any changes at all in the competitive environment and what some folks are offering or promotional high balanced money markets type stuff or anything like that?.

I would say at this point, we’ve seen very little change, deposit pricing..

Okay..

And I imagine people are experiencing the same thing we are what used to be the seasonal influence of Q1 and Q3, don’t all flow back out again in Q2 and Q4. The liquidity levels just keep rising without really having to get out and compete in our markets anyway..

Okay, got it.

And then on deposit service fees overdraft have you made any changes recently to your consumer deposit pricing metrics or overdraft charges or anything different there that might be driving some of the changes that we saw during the second quarter?.

We’ve had no changes in pricing..

Yes. .

But we've --.

I have mentioned it earlier we really had seen probably much more compression and decline in those charges over the last two years than a lot of other banks have. I think this hopefully this will represent little bit of turning point those kind of hesitate to call it seasonal or not.

I think to be great to get another quarter under our belt and then may be talk about, what forced these trends..

Okay. Got it, thank you..

That does conclude today's question-and-answer session. Mr. Wenger, at this time, I'd like to turn the conference back over to you for any additional or closing remarks..

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

This does conclude today's conference. Thank you for your participation..