DBRS Confirms Fulton Financial Corporation at A

Dominion Bond Rating Service (“DBRS”) has today confirmed its ratings on Fulton Financial Corporation (“FFC” or the “Company”) and its lead bank subsidiary, Fulton Bank (“FB”), as indicated above, subsequent to its ongoing reviews of the company. DBRS has also assigned new ratings to FFC’s subordinated debt and to FFC’s 14 other banking subsidiaries. The trends on all ratings are Stable.

The ratings of Fulton Financial Corporation are underpinned by above-peer recurrent core earnings, a robust Pennsylvania-based community deposit franchise, and strong asset quality. Challenges with regard to organic and acquired growth, funding, holding company liquidity, and rising commercial real estate (CRE) and construction exposures are also incorporated into the assigned ratings level.

Operating an organization of 15 distinct community banks, or affiliates as it refers to them, Fulton concentrates on CRE, small business and middle-market lending, retail, and residential home loans. Fulton’s earnings power and efficiency, while gradually declining, are generally superior to its peers, while net interest margins have been stable and competitive. Acquisitions have become the most important driver of growth; however, DBRS believes the Company also needs to grow organically to succeed. Modest fee income levels augment earnings and are primarily generated from wealth management, investment services and mortgage sales.

A five-state footprint has been achieved through 25 acquisitions over a 15-year period as Fulton is migrating toward higher growth markets along the mid-eastern U.S. coast. Consistently successful acquisitions have proven Fulton’s strong discipline and superior integration skills. Managing, expanding, and controlling the costs of this burgeoning organization while retaining its community-banking model, however, will remain an ongoing challenge for Fulton. Although much loan growth has been come from acquired banks and has focused on CRE and construction lending, the Fulton affiliate banks have demonstrated a superior ability to manage their loan portfolios over time, as evidenced by consistently low non-performing loans (NPL) and net charge-offs (NCO). In a significant regional real estate downturn; however, Fulton’s earnings would be pressured. The CRE concentration is mitigated by a majority of owner-occupied properties and consistently good asset quality over many years through difficult real estate market cycles.

The Company has a robust core deposit franchise with strong market shares that traditionally afford Fulton the ability to fund most of its own loan growth. The Company faces a medium-term challenge; however, with weak organic deposit growth and a growing proportion of Certificates of Deposits (CDs) and non-deposit funding while loan growth typically exceeds deposit growth. Fulton retains more than ample borrowing capacity for short- and long-term borrowing and liquidity needs. Limited resources at the parent holding company level, however may somewhat limit its financial flexibility relative to peers.