Morningstar DBRS Confirms Fulton Financial Corporation's Long-Term Issuer Rating at A (low); Stable Trend

DBRS, Inc. (Morningstar DBRS) confirmed the credit ratings of Fulton Financial Corporation (Fulton or the Company), including the Company's Long-Term Issuer Rating of A (low). At the same time, Morningstar DBRS confirmed the credit ratings of its primary banking subsidiary, Fulton Bank, N.A. (the Bank). The trend for all credit ratings is Stable. The Intrinsic Assessment (IA) for the Bank is "A," while its Support Assessment remains SA1, reflecting internal support provided by the parent. The Company's Support Assessment remains SA3, meaning that timely systemic support is not expected. The Company's Long-Term Issuer Rating is positioned one notch below the IA.

KEY CREDIT RATING CONSIDERATIONS
Fulton's credit ratings confirmation and Stable trend reflect the Company's solid community banking franchise operating in a number of states and historically good asset quality that is supported by consistent and conservative loan underwriting and a fairly granular loan portfolio. Additionally, the Company exhibits good core deposit funding, as well as a sound capital position. Fulton's ratings also consider the Company's limited scale and somewhat concentrated position in commercial real estate loans (CRE).

Morningstar DBRS expects that the Company's credit fundamentals, earnings, funding, and liquidity levels will remain sound despite an uncertain operating environment that includes the unknown impact of tariff policy and likely weaker economic growth and the expectation that asset quality metrics may modestly weaken.

The Company's Intrinsic Assessment of "A" has been assigned at the midpoint of the Intrinsic Assessment Range. Morningstar DBRS views Fulton's credit fundamentals and performance as commensurate with those of similarly rated peers.

CREDIT RATING DRIVERS
Over the longer term, the credit ratings would be upgraded if Fulton grew its franchise, resulting in greater scale and revenue diversity, including a lower reliance on commercial real estate lending, while maintaining solid asset quality and profitability metrics. Conversely, a credit ratings downgrade would result from sustained below-peer profitability levels or a significant deterioration in asset quality.

CREDIT RATING RATIONALE
Franchise Combined Building Block Assessment: Good / Moderate
Lancaster, Pennsylvania-based Fulton is a regional banking company with $32.1 billion in assets at March 31, 2025. The Company operates a community banking model with local decision making through approximately 200 financial centers in Pennsylvania, Maryland, Delaware, New Jersey, and Virginia. Fulton also provides investment management and planning services for individuals and corporations through Fulton Financial Advisors and Fulton Private Bank. In addition, the Company offers residential mortgage services through Fulton Mortgage Company. The April 2024 FDIC-assisted acquisition of Republic First Bank is on strategy and increased the Company's presence in the Philadelphia MSA, a key growth area for the Company.

Earnings Combined Building Block Assessment: Strong / Good
Fulton's earnings were solid in recent periods, including an operating ROAA and ROAE for Q1 2025 of 1.25% and 15.95%, respectively, which was improved both quarter over quarter and year over year. Additionally, the Company calculated efficiency ratio was 56.7%. For 2024, the Company reported net income of $288.7 million compared with the $284.3 million earned in 2023¿a 16% increase. For the year, higher revenues, including a 12.4% increase in net interest income, was offset by a higher provision for credit losses and higher expenses. Noninterest income, from a variety of sources, accounts for approximately 20% of total revenue, a good percentage for an institution in this asset size range.

Risk Combined Building Block Assessment: Good
Consistently strong asset quality and conservative underwriting have remained a key strength for the Company and help underpin the credit ratings. Morningstar DBRS considers Fulton's relatively high level of CRE and construction loans, which represented approximately 45% of total loans, a concentration risk. Somewhat reducing this risk are the highly granular exposure limits the Company has maintained for both borrowers and projects, low loan-to-value ratios (LTVs) as well as a large percentage of owner-occupied CRE exposures that are typically less risky. Net charge-offs were 0.21% for Q1 2025 while nonperforming assets represented 0.62% of assets at March 31, 2025, remaining highly manageable and roughly in line with recent trends. Morningstar DBRS continues to view current asset quality metrics as unsustainably low and expects these metrics to continue to normalize.

Funding and Liquidity Combined Building Block Assessment: Strong / Good
Morningstar DBRS views the Company's funding and liquidity as solid. Deposits increased 21% in 2024 primarily due to the $3.7 billion in total deposits assumed in Republic First transaction. With a loan-to-deposit ratio of 91%, the Company fully funds its loan portfolio with deposits and is not reliant on wholesale funding. On balance sheet liquidity remains sound, and the Company has ready access to additional sources of liquidity, if needed. Uninsured and uncollateralized deposits represented 23% of total deposits, and the Company has committed sources of liquidity to more than cover these deposits.

Capitalization Combined Building Block Assessment: Strong / Good
Regulatory capital ratios remain sound. Specifically, the CET1 ratio was 11.1% as of March 31, 2025, 410 basis points above the regulatory minimum (including the capital conservation buffer) of 7.0%. On May 1, 2024, The Company completed an equity raise to facilitate last year's Republic First Bank acquisition, raising approximately $273.5 million. Fulton manages its capital through its common stock dividend as well as share buybacks, and the Company has a $125 million share authorization buyback in place through the end of the year.

Further details on the Scorecard Indicators and Building Block Assessments can be found at https://dbrs.morningstar.com/research/455444.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS  
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings at (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (May 23, 2025) https://dbrs.morningstar.com/research/454637. In addition Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The primary sources of information used for this credit rating include Morningstar, Inc. and company documents. Morningstar DBRS considers the information available to it for the purposes of providing this credit rating was of satisfactory quality.

The rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website https://dbrs.morningstar.com/understanding-ratings

The last credit rating action on this issuer took place on May 30, 2024.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are under regular surveillance.

For more information on this credit or on this industry, visit http://dbrs.morningstar.com.

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