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Fulton Financial Corp (NASDAQ:FULT)
Q4 2019 Earnings Call
Jan 22, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Fulton Financial Fourth Quarter 2019 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I'd now like to hand the conference over to your speaker today, Jason Weber. Thank you, sir. Please go ahead.

Jason H. Weber -- Senior Vice President/Director of Corporate Development and FP&A

Thank you, Doolan. Good morning. Thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for 2019. Your host for today's conference call is Phil Wenger, Chairman and Chief Executive Officer. Joining Phil Wenger is Curt Myers, President and Chief Operating Officer and Mark McCollom, 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 PM yesterday afternoon. These documents can be found on our website at www.fult.com by clicking on Investor Relations, 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 and are 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 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 in Slides 14 and 15 of these non-GAAP financial measures to the most comparable GAAP measures.

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

E. Philip Wenger -- Chairman and Chief Executive Officer

Well, thanks, Jason, and good morning, everyone. Thanks for joining us. I have a few prepared remarks before our President and Chief Operating Officer, Curt Myers provides insights on our business performance for 2019. When Curt's finished, our Chief Financial Officer, Mark McCollom will share the details of our financial performance and discuss our 2020 outlook. When Mark concludes, we'll open the phone line for questions.

Overall, 2019 was another good year for our Company as we hit record levels of revenue and net income. Our financial results in 2019 reflected our continued progress in executing our growth strategies. On the corporate front, we had several key milestones during 2019. Our last remaining BSA/AML consent order was terminated, we completed our multi-year initiative to consolidate all of our affiliate banks into Fulton Bank and the Department of Justice informed us that it completed its fair lending investigation of Fulton, without taking any action against the Company. Achieving these milestones would not have been possible without the efforts of so many dedicated and hardworking Fulton employees. Together, achieving these milestones will not only help unify our brand, but also facilitate growth moving forward.

We continue to grow in Philadelphia and Baltimore and both markets have a team of commercial and consumer relationship managers serving the markets to help us take advantage of what we view as tremendous long-term growth opportunities. In Philadelphia, we opened three financial centers in 2019 and have one targeted to open in 2021. In Baltimore, we opened one financial center and one loan production office in 2019 and we have one financial center targeted to open in early 2020 and one in 2021. Despite these openings, we had a net reduction of four financial centers in 2019. So, we ended the year at 213 [Phonetic]. Since 2014, we have consolidated 37 financial centers or approximately 14%. And doing so has increased our average deposits per financial center to approximately $75 million, up from approximately $50 million in 2014.We believe there will be more opportunities to consolidate over time as we react to changing customer preferences and behaviors.

In addition to consolidation, we have been working on a multi-year project to optimize all of our delivery channels, including our financial centers. Optimizing will allow us to focus on higher value activities geared toward advice and sales [Technical Issues] and create a greater focus on the customer experience. To date, approximately 25% of our financial centers are in this optimized format.

We launched a new state-of-the-art commercial loan origination system in the second half of 2019 and we're excited about the new system as it streamlines the underwriting process, keeps our customers more informed and allows our relationship managers to focus more time on acquiring new business. In early January of 2019, we launched a new mortgage loan origination system and the new system should lead to greater efficiencies, increased revenue opportunities and a better customer experience.

From a talent perspective, we continue to invest in people to drive growth. In 2019, we increased our commercial revenue producer head count by 5%. In consumer, our headcount was down 2% in 2019 and that was driven primarily by financial center consolidation. Despite this decrease, we saw an increase of approximately 12% in revenue-producing mortgage headcount. Strategically, the deployment of capital for the enhancement of long-term shareholder value remains one of our highest priorities and after 13 years of being on the sidelines from an M&A perspective, in 2019, we deployed some of our excess capital to purchase two wealth management businesses with approximately $320 million in assets under management or administration. Our wealth management division has approximately $11 billion in assets under management or administration as of year end.

And before I turn it over to Curt, I want to express my gratitude to our Board of Directors, our senior management members and most importantly, our Fulton employees for their hard work last year and for their continued focus on serving our customers, communities and shareholders. Many of the legal and regulatory hurdles that hindered our growth in the past are now behind us. We look forward to 2020 and we believe we are well positioned to continue to advance our strategic priorities.

So now, I'd like to turn the call over to Curt to provide insights on our business performance for 2019. Curt?

Curtis J. Myers -- President and Chief Operating Officer-Fulton Financial Corporation

Thank you, Phil, and good morning everyone.

Our commercial and consumer lines of business performed well in 2019. We are pleased with our overall loan and deposit growth during the year. In addition, fee income had a strong year-over-year growth, driven by commercial interest rate swap fees, mortgage banking income and wealth management fees. In our commercial line of business, we saw double-digit growth in loan originations, but that was partially offset with higher prepayments as the lending environment remained extremely competitive throughout the year. Even in this highly competitive market, our commercial loan pipeline at December 31, 2019 increased 28% year-over-year, reflecting our focus calling in sales efforts and our generally good business activity with our customers and prospects.

Moving to fees, our commercial loan interest rate swap income grew by over 50% year-over-year, benefiting from strong growth in commercial originations. Treasury services, as well as our SBA business made notable contributions, benefiting from improved business activity and solid sales performance.

In our consumer line of business, our mortgage company continues to grow at a strong pace by increasing market share and benefiting from the low rate environment. Total residential mortgage originations for 2019 were approximately $1.8 billion, an increase of 34% year-over-year. Refinance activity accounted for 30% of the originations in 2019, compared to 21% in 2018. Our residential mortgage portfolio increased 17% year-over-year. This portfolio is comprised of in-footprint, fixed and adjustable-rate mortgages with a weighted average borrower credit score of 753. Despite retaining more of our production in 2019, mortgage banking income continued to drive meaningful revenue growth. Mortgage rent [Technical Issues] 21% year-over-year on strong originations and stable gain on sale.

Our indirect auto portfolio continues to grow at a solid pace. That portfolio is comprised of in-footprint, new and used auto loans with a weighted average borrower credit score of 794. Our wealth management fees grew at a nice pace year-over-year as well, due to both overall market performance and our continued asset gathering focus. Brokerage revenue grew 12% year-over-year and continues to be one of our fastest growing segments. Deposit growth was another bright spot in 2019. Growth was driven primarily by our commercial business. Our loan-to-deposit ratio ended the year at approximately 97%, comfortably within our historical operating range.

Moving to credit, overall asset quality continues to be relatively stable. The increase in our non-performing loans and provision for credit losses this quarter were primarily driven by a single commercial relationship moving to non-performing status. Excluding this relationship, non-performing loans and the provision for credit losses would have declined linked quarter. With respect to net charge-offs, the increase in the quarter was related to a handful of credits in unrelated industries and our net charge-offs to average loans of 17 basis points was consistent with the fourth quarter of last year. Net charge-offs to average loans for 2019 was 10 basis points compared to 34 basis points for 2018.

As we've mentioned in the past, we are very mindful of where we are in the economic cycle and are continuing to assess and analyze the loan portfolio for signs of weakness or stress.

Now, I'd like to turn the call over to Mark to discuss our financial results in more detail. Mark?

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Thank you, Curt, and good morning to everyone on the call.

Unless I note otherwise, the quarterly comparisons I will discuss are with the third quarter of 2019 and annual comparisons are with 2018. Starting on Slide 7, earnings per diluted share this quarter were $0.33 or net income of $54 million. Fourth quarter earnings in comparison to the third quarter were impacted by a higher provision for credit losses and lower net interest income. However, operating expenses decreased and non-interest income was unchanged for the quarter. We'll step through each of these components in a moment.

Moving to Slide 8, our net interest income was $159 million, a decrease of $2 million linked quarter, driven primarily by a 9 basis point decrease in our net interest margin, partially offset by the impact of balance sheet growth. Our net interest margin for the quarter was 3.22% and our full year margin was 3.36%, both in line with our expectations. The quarterly net interest margin decrease was driven by two 25 basis point Fed funds rate decreases in September and October of 2019. Due to the level of variable and adjustable-rate loans in our portfolio, our fourth quarter loan yields decreased more than our deposit costs. Primarily due to the interest rate decreases, average loan yields in the fourth quarter of 2019 declined 24 basis points and average yields on interest-earning assets, declined 18 basis points compared to the third quarter. Our cost of funds decreased 11 basis points as deposit costs declined 7 basis points and our cost of short-term borrowings was down 49 basis points.

Since we started reducing our deposit costs in the back half of 2019, we are pleased with the deposit retention we have maintained thus far. We believe this gives us deposit pricing flexibility heading into the first quarter of 2020. The 4 basis point decrease in the net interest margin from 2018 was within the range we provided in our updated outlook during the third quarter of 2019. For the year, our net interest income increased $18 million or 3% from 2018, driven by a 4% increase in average interest earning assets, partially offset by the impact of the 4 basis point decline in net interest margin. Yields on interest earning assets increased 18 basis points, while our cost of funds increased at a higher rate of 22 basis points. The increase in interest earning asset yields was realized primarily in loans, which saw a 17 basis point increase. The increase in the cost of funds was driven mainly by deposits.

Turning to credit on Slide 9, in 2019, the provision for credit losses decreased $22 million from 2018, largely due to a $37 million provision for credit losses in 2018 related to a customer fraud. For the fourth quarter of 2019, the provision for credit losses did increase at a higher rate than previous periods to approximately $13 million, primarily driven by one commercial relationship.

Net charge-offs for the year as a percent of average loans were 10 basis points, compared to 34 basis points in 2018. Adjusting for a $34 million charge-off related to the customer fraud in 2018, net charge-offs for 2018 would have been 12 basis points. For the fourth quarter of 2019, net charge-offs on an annualized basis were 17 basis points as compared to 15 basis points in the third quarter and unchanged from the fourth quarter of 2018.

Non-performing loans at December 31, 2019 increased $21 million or 15% in comparison to 2018, primarily due to the aforementioned commercial relationship. Non-performing loans as a percentage of total loans increased to 96 basis points as compared to 86 basis points at the end of last year. In comparison to the third quarter, non-performing loans increased $25 million. The allowance for credit losses to loans at December 31, 2019 was 1.06%, relatively unchanged from 2018. The allowance for credit losses coverage ratio as a percentage of non-performing loans, decreased to 111% at December 31, 2019 as compared to 121% in 2018 and 127% at the end of the third quarter.

Moving to Slide 10, non-interest income excluding securities gains was unchanged in comparison to the prior quarter. Increases in wealth management income and commercial loan interest rate swap fees are offset by declines in consumer card income, merchant and commercial card income, as well as a seasonal decline in mortgage banking income. For the full year, 2019 was a very solid year in our fee-based businesses as our non-interest income excluding securities gains grew $16 million or 8% for the year. During 2019, all major categories increased with the most notable increases occurring in commercial loan interest rate swap fees of $5 million and wealth management and mortgage banking income, each up [Phonetic] $4 million.

Moving to Slide 11, our non-interest expenses decreased $7 million in the fourth quarter as third quarter expenses were elevated by $5 million of charter consolidation costs and $4 million in prepayment penalties on certain FHLB advances, offset by a $2 million decrease in FDIC insurance assessments. Adjusting for these items, fourth quarter expenses were essentially flat compared to the third quarter. For the year, non-interest expense increased $22 million. Salary and benefits expense was roughly half this year-over-year increase, growing $10 million. We also had a $7 million increase in charter consolidation cost during the year as we continue to simplify our franchise and unify our brand, and this was recognized in various expense categories throughout the year.

As previously mentioned, the $4 million of additional expense in 2019 was due to the prepayment penalties on FHLB advances, which was offset by a similar amount of investment securities gains. Partially offsetting these increases were a decrease in FDIC insurance expense due to $3 million of credits recognized in 2019 as well as lower amortization on tax credit investments.

Our income tax expense decreased $2 million linked quarter. Our effective tax rate was 13% for the quarter, compared to 14% in the third quarter of 2019. For the year, income tax expense increased $14 million, primarily due to higher income before taxes. Our effective tax rate for the full year 2019 was 14%, in line with our guidance. Slide 12 displays our profitability and capital levels over the past four years. We continue to see increases in both returns on average assets and returns on tangible equity, over the periods presented as a result of higher earnings.

In 2019, we repurchased $111 million of our common stock, a total of 6.8 million shares at an average cost of $16.25 per share. We also paid common stock dividends of $93 million resulting in a return to shareholders of 88% of our 2019 net income.

Lastly, we would like to provide our initial outlook for 2020 which is shown on Slide 13. For loans and deposits, we are expecting average annual loan and deposit growth rates in the low-to-mid single-digit range. We expect our net interest income to grow at a low-single-digit growth rate in 2019 and our net interest margin to be in the range of 3.20% to 3.25% for the year. We have assumed one 25 basis point Fed funds decrease in the second quarter of 2020. The net interest income outlook reflects the impact of balance sheet growth, mitigating the expected modest decline in our net interest margins.

We expect our non-interest income to increase year-over-year at a mid-single-digit pace. Excluding the charter consolidation costs incurred in 2019, we expect our non-interest expense to increase year-over-year at a low-single-digit range. With the adoption of CECL in the first quarter of 2020, we expect our allowance for credit losses to increase between 20% and 30% or $35 million to $50 million, which will be reflected as a decrease to retained earnings net of income tax effects. With respect to the provision for credit losses, we would expect to be in the range of $25 million to $40 million for the full year 2020. We expect our effective tax rate to be between 14% and 16% for the year.

And with that, we'll now turn the call over to the operator for questions. Dylan, your help please.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Casey Haire from Jefferies. Please go ahead.

Casey Haire -- Jefferies & Co. -- Analyst

Yeah, thanks, good morning guys.

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Hi, Casey.

Casey Haire -- Jefferies & Co. -- Analyst

Mark, wanted to touch on the the NIM guide. If it does have a Fed cutting there, if you did not get that Fed cut, what would the NIM guide look like?

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Yeah, on an annualized basis, not getting that cut would add between 3 basis points and 5 basis points on an annualized basis and we're assuming that happens in the second quarter. So, you'd have to take sort of nine months impact of that, nine rate months impact.

Casey Haire -- Jefferies & Co. -- Analyst

Okay, great. And just -- as we -- as I look at the components of the NII guide, piecing together the balance sheet and the NIM, if I take the midpoint of the guide that you guys provided, it's tricky to get to NII growth next year and I'm just -- I think, there's a lot of confusion about this and I just was wondering if you guys could clarify how A plus B is sort of not equal to C?

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Well, yeah. If you take our net interest income for this year, which was right around $650 million, and again, if you grow loans and deposits in that low-to-mid rate and then if you don't factor in the rate cuts for next year, again, I just said that that rate cut is giving you an extra 3 basis points to 5 basis points annualized. We have about $21 billion, $20.5 billion of interest-earning assets for next year. If you run the math, I'm happy to take this offline with you, but we think there would be low-digit growth in our NII.

One of the wildcards in that I would say, Casey, is we need to -- look, we were pleased and I said this in my prepared remarks, we were pleased with our ability to cut deposit costs in the fourth quarter of 2019 and despite cutting those costs, we actually held onto deposits a little bit better than we anticipated in the fourth quarter, which led to some of that fourth quarter average deposit growth that you saw. That growth was not just in -- as you're aware, we have third quarter growth related to public funds, which tends to come out in the fourth quarter, but a lot of the growth that we saw in the fourth quarter was more in our core commercial business and not necessarily in the public funds. So, to the extent we're able to hold onto those deposits in 2020, that also factors into our NII and NIM guide for the year.

Casey Haire -- Jefferies & Co. -- Analyst

Okay, all right. Just moving on to the fees. So, what is your starting point for the guide there and then what do you have as drivers of the fee growth given that you guys are coming off of a very strong year in terms of capital markets and mortgage banking? So, to get to mid-single digits would be a very strong outcome off of a very good 2019.

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Yeah. So the starting point for that case would be, we were for the year, right around to $211 million [Phonetic]. If you strip out the securities gains. So strip out the securities gains as you're starting point to start with the $211 million for that midpoint guide and when you look to areas of growth, I think the area that we've been the most bullish on and have invested in has been wealth management. Wealth management was up, I think, around 6.5% for this year, 6.8% year-over-year. We do not expect the same certainly percentage growth in our swaps business for next year, but we would still expect to see growth in that category next year and I would say, those would be the two areas I would single out the most as well as as card revenues.

Casey Haire -- Jefferies & Co. -- Analyst

Okay, great. Thank you. I'll leave it there.

Operator

Thank you. Our next question comes from Chris McGratty from KBW. Please go ahead.

Chris McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

Hey, good morning.

E. Philip Wenger -- Chairman and Chief Executive Officer

Good morning, Chris.

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Good morning, Chris.

Chris McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

Hey, Mark. Maybe just the same question that Casey asked about starting point, but can you give us the dollar amount that we're starting on expenses over the total charter charges?

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Yeah, sure. Those are around $12 million rounded. So, I think a good number to start out would be kind of $556 million, $557 million of expenses would be a good starting point to have that low-single-digit growth rate off of.

Chris McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

Okay. And then maybe, just coming back to the margin, I guess, I'm a little confused because the last couple of years, your margin certainly benefited from higher rates and now we're factoring in a cut and the NII -- the margin guide is a little bit higher than the Street has expected. So structurally, I mean, how do we think about -- any tweaks or changes you made to the balance sheet because it would just seem that, if rates are going to get cut, that margins would be expanding?

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Yeah, well, again, you really have to go back and look at deposits. Our deposit beta -- on the way up, our deposit beta was around 20% -- mid-20s. We are expecting on the way down that we're going to be able to exceed that. And again, based on the success we saw in the fourth quarter, that actually led to some of the guide that we've given.

Chris McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

Okay. So, it's purely on liabilities. Okay. Maybe on capital, I don't think you repurchased stock in the quarter. I guess two questions. One, can you remind us what's authorized and two, was there anything maybe inorganic that may have prohibited you guys from buying the stock or is that just the price of the stock? Thanks.

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Yeah, I mean, as you know, when you look at the capital waterfall, we always look at our organic growth first. We did have a solid quarter of loan growth during the fourth quarter. We also look at stock price levels. We currently have $100 million authorized for 2020.

Chris McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

Okay. And so, based on where the stock's trading today, I mean, would you assume that you would pick away at that in the coming quarters or is this at a level where you might not be in the market?

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

I think, again, Chris, there's always going to be organic growth first and then we look at the stock price, look at inorganic growth opportunities, those all play into that.

Chris McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

Okay, thanks.

Operator

Thank you. Our next question comes from Frank Schiraldi from Piper Sandler. Please go ahead.

Frank Schiraldi -- Piper Sandler & Co. -- Analyst

Good morning.

E. Philip Wenger -- Chairman and Chief Executive Officer

Good morning, Frank.

Frank Schiraldi -- Piper Sandler & Co. -- Analyst

Just -- I wanted to ask on the commercial loan, you guys have not -- you haven't provided that much information. Maybe, I guess, that's by design, but in terms of the larger provision in the quarter and the one commercial loan or a commercial relationship you cite, can you give us any more color on industry type or total exposure collateral? Anything you can provide would be welcomed. Thanks.

Curtis J. Myers -- President and Chief Operating Officer-Fulton Financial Corporation

Thanks, Frank. It's Curt. I'll give you a little bit. It's an active situation. We're continuing to work with the borrower. So, I can't provide a lot of information, but it is a C&I credit. It's not in the Ag portfolio. So, it's general a C&I credit. It has been a full relationship for a number of years. The Company is operating, and we're working diligently through the situation. It did drive -- as our prepared remarks said, it did drive the provisioning and the non-performing for the quarter.

Frank Schiraldi -- Piper Sandler & Co. -- Analyst

Okay. So it was basically the increase in non-performing we can -- can you say [Indecipherable] basically all this relationship here?

Curtis J. Myers -- President and Chief Operating Officer-Fulton Financial Corporation

It was the primary driver.

Frank Schiraldi -- Piper Sandler & Co. -- Analyst

Okay. And then, can you just say whether was this relationship already in classified -- criticized prior to the quarter? Or is this a new problem credit?

Curtis J. Myers -- President and Chief Operating Officer-Fulton Financial Corporation

Yeah, it is a new problem credit, correct.

Frank Schiraldi -- Piper Sandler & Co. -- Analyst

Okay. Okay. Okay, thanks. And then, just in terms of -- you guys mentioned buybacks, Mark, of course, as you said organic growth takes priority, but in terms of M&A versus buybacks, just wondering how you would prioritize those two given where the stock's trading here. And then, if you could give any further thoughts on M&A. I know you've done something on the wealth management side, but in terms of whole bank M&A, your thoughts on -- just remind us on size here that you guys are -- would likely consider as sort of the first deal in sometime.

E. Philip Wenger -- Chairman and Chief Executive Officer

Yeah, so from a size standpoint, Frank, I think we've said between $500 million and $8 billion or $9 billion, we would like the first deal to be at the lower end of that range.

Frank Schiraldi -- Piper Sandler & Co. -- Analyst

Okay. And then, in terms of priority buybacks, given where the stock is now or M&A -- whole bank M&A?

E. Philip Wenger -- Chairman and Chief Executive Officer

The M&A, it's really hard to predict when and in our mind, it's more about how strategic it is for us. So, if the right strategic opportunity came along, it would be a high priority.

Frank Schiraldi -- Piper Sandler & Co. -- Analyst

Okay. And then, just finally on deposits, you've seen some really nice growth. I think you would see some -- you might have even mentioned about some muni run off this quarter off of sort of higher levels. So, assuming that continues in the coming quarter, can you talk about what sort of pick up you get on -- forget about the betas and repricing, but just thinking about a mix shift away from that muni book, sort of, seasonally, what sort of pick up you get on deposit costs?

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Well, yeah, if, Frank -- I mean, if we have -- our muni book at year end was around $2.1 billion, about 55% of that was indexed, the blended rate though on that muni book was still much more attractive than a wholesale funding. It was about 90 basis points, but you compare that to say our core deposit rate and obviously that's still high, relative to our overall book. So, to the extent that we're able to grow more in our core consumer and commercial businesses, we'd have the ability to pick up significant basis points from that.

Frank Schiraldi -- Piper Sandler & Co. -- Analyst

When does that peak again, the muni book?

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

In the third quarter.

Frank Schiraldi -- Piper Sandler & Co. -- Analyst

Okay. All right. Great, thanks.

Operator

Thank you. Our next question comes from Daniel Tamayo from Raymond James. Please go ahead.

Daniel Tamayo -- Raymond James -- Analyst

Good morning, guys.

E. Philip Wenger -- Chairman and Chief Executive Officer

Good morning.

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Hey, good morning, Dan.

Daniel Tamayo -- Raymond James -- Analyst

So, sorry to go back to this, but just wanted to clarify, Mark, your comments on the NII guidance because you were talking about the impact of the rate cut not happening. So, the low single digits for NII, does not -- it includes -- I'm sorry, it includes that one 25 basis point rate cut. Is that right?

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

That is correct.

Daniel Tamayo -- Raymond James -- Analyst

Okay. So, the lack of rate cut would be incremental to that guide. On the balance sheet, the securities portfolio growth, is that -- are you expecting that to be similar to the loan and deposit growth?

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Yeah. I mean, our investment portfolio is for liquidity purposes only. So, I mean, I wouldn't anticipate that to grow beyond the overall growth in other earning assets.

Daniel Tamayo -- Raymond James -- Analyst

Okay, perfect. And then, switching gears here, looking at the wealth management, you talked about that being a strong driver of growth in the fees. In the past year or so, has most of that been organic? What's been the driver of that accelerated growth there? Have you been hiring teams or have you seen just strong performance from the current teams, kind of outside of the market performance.

Curtis J. Myers -- President and Chief Operating Officer-Fulton Financial Corporation

It's really been -- Dan, it's been all those factors. So, we did make the two acquisitions, just added assets. We are gathering assets. And then, obviously, the market performance helps that business. So, it's really across the board.

Daniel Tamayo -- Raymond James -- Analyst

Sure, yeah. You had the acquisitions there. And I guess that would do it for me. Thank you. Appreciate it guys.

E. Philip Wenger -- Chairman and Chief Executive Officer

Well, thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from Russell Gunther from Davidson. Please go ahead.

Russell Gunther -- D.A. Davidson -- Analyst

Hey, good morning guys.

E. Philip Wenger -- Chairman and Chief Executive Officer

Hi, Russell.

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Hey, good morning, Russell.

Russell Gunther -- D.A. Davidson -- Analyst

Just a quick follow-up on the fee guidance. Appreciate everything you've commented so far, but if you could give us some detail in terms of what you're assuming for mortgage banking that's embedded in that mid-single-digit guide?

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Yeah, it is assuming that the volumes come down a little bit and spreads stay relatively flat to where they were this year. So, it would come off a little bit from this year.

Russell Gunther -- D.A. Davidson -- Analyst

Got it. Okay, great. Thanks, Mark. And then, just with regards to the loan growth outlook, so that mid single digits, could you guys give us some color as to, both from an asset class and geographic mix perspective, what you would think the drivers of that growth would be?

E. Philip Wenger -- Chairman and Chief Executive Officer

Well, in the last couple of years, we've had nice growth in C&I, some CRE, the consumer side, our residential mortgage and our indirect lending book and I think as we go into 2021, we're looking pretty much at the same kind of mix.

Russell Gunther -- D.A. Davidson -- Analyst

Okay, great. Thanks, Phil. And then last question and this came up with regard to the C&I credit, but just your thoughts on your Ag portfolio asset quality in 2020?

E. Philip Wenger -- Chairman and Chief Executive Officer

In the Ag portfolio, we think it's really stabilized and we are seeing improvement on the credit side of that portfolio.

Russell Gunther -- D.A. Davidson -- Analyst

All right, great. Very good, guys, thanks. That's it for me.

E. Philip Wenger -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. I show no further questions in the queue. At this time, I'd like to turn the call over to Phil Wenger, CEO for closing remarks.

E. Philip Wenger -- Chairman and Chief Executive Officer

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

Operator

[Operator Closing Remarks]

Duration: 39 minutes

Call participants:

Jason H. Weber -- Senior Vice President/Director of Corporate Development and FP&A

E. Philip Wenger -- Chairman and Chief Executive Officer

Curtis J. Myers -- President and Chief Operating Officer-Fulton Financial Corporation

Mark McCollom -- Senior Executive Vice President / Chief Financial Officer

Casey Haire -- Jefferies & Co. -- Analyst

Chris McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

Frank Schiraldi -- Piper Sandler & Co. -- Analyst

Daniel Tamayo -- Raymond James -- Analyst

Russell Gunther -- D.A. Davidson -- Analyst

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